Shreekant Gupta , Bishwanath Goldar , Shubham Dang , Omer F. Baris
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Environmental backsliders, repeat offenders and capital markets: Evidence from India
Regulatory rollbacks raise a critical question for emerging markets: do investors discipline firms that relapse on environmental performance? We combine the two public rounds of India’s Green Rating Project (GRP) for 17 mills in the paper-and-pulp sector with a variance-robust event study. We uncover a double-digit market penalty for environmental backsliding (decline in green rating), proving that investors care about a firm’s trajectory, not just its current score. Plants that improve or maintain ratings experience no significant abnormal return. Periodic, third-party performance evaluation and rating programs can leverage capital-market discipline to compensate for persistently weak regulation in emerging markets or for regulatory rollback as observed in the U.S., Brazil and Europe.
期刊介绍:
Many economists today are concerned by the proliferation of journals and the concomitant labyrinth of research to be conquered in order to reach the specific information they require. To combat this tendency, Economics Letters has been conceived and designed outside the realm of the traditional economics journal. As a Letters Journal, it consists of concise communications (letters) that provide a means of rapid and efficient dissemination of new results, models and methods in all fields of economic research.