| dc.description.abstract | This thesis exammes the market reaction to negative environmental news in the
Scandinavian stock market. As leading markets within ESC practices, these countries
provide an interesting insight into the incorporations of ESC actions into investors'
decisions. Accordingly, we investigate whether the degree of carbon exposure or the firm's
environmental incident history affects investors' expectations and, consequently, reactions.
In contrast to previous research, we find no reaction to environmental news when examining
the sample as a whole. While we hypothesize a different stock price reaction for carbonintensive
sectors, followed by a higher increase in abnormal trading volume than non-carbon
intensive ones, we find no support for these two hypotheses. We argued that investors
alter their anticipations due to carbon-intensive sector characteristics and environmental
regulatory risk. However, we find no difference in market reaction based on carbon
exposure. Secondly, we examine whether the firms' history of environmental offenses
affects investors' expectations, hypothesizing lower stock price reaction and a smaller
increase in abnormal trading volume for high- compared to low-frequency offenders. We
argued that a higher incident rate should reduce asymmetric information related to
the firms' ESC business conduct, causing a convergence in investors' opinions. This
convergence is additionally explained by the high-frequency offenders contains larger firms
on average. These firms often experience higher media coverage, reducing the asymmetric
information. However, we find no difference between the two groups.
Nevertheless, the proposed firm size effect seems to hold. We detect an interesting
relationship between market reaction and firm size, and time, respectively. Larger
companies experience a less negative stock price and trading volume reaction, in line with
the reduced asymmetric information argument. Concerning the time trend, we find a less
negative market reaction over the decade. We argue that this reflects an increase in ESC
awareness in the Scandinavian markets.
Accordingly, we conclude that no news for investors, is good news for ESC awareness and
the transition towards a sustainable future. | en_US |
