Stock market reaction to mandatory climate change reporting: case of Bursa Malaysia

IF 3.6 Q1 BUSINESS, FINANCE Review of Accounting and Finance Pub Date : 2024-08-26 DOI:10.1108/raf-01-2024-0015
Dharen Kumar Pandey, Waleed M. Al-ahdal, Faten Moussa, Hafiza Aishah Hashim
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Abstract

Purpose

This study aims to comprehensively understand market reactions to Bursa Malaysia's announcement on mandatory climate-change-related disclosures, exploring sector-specific dynamics and cross-sectional influences.

Design/methodology/approach

The study uses event study methodology on 412 listed firms to analyze market reactions around the announcement date. The sector-wise analysis further delves into variations across industries. Cross-sectional analysis explores the significance of environmental, social and governance (ESG) scores and firm controls in explaining the differences across sample firms.

Findings

The event study reveals initial negative market reactions on the event day, with a subsequent shift from positive to negative cumulative impact, indicating the evolving nature of investor sentiment. The sector-wise analysis highlights heterogeneous effects, emphasizing the need for tailored strategies based on industry-specific characteristics. The cross-sectional findings underscore the growing importance of ESG factors, with firm size and performance influencing market reactions. Financial leverage and liquidity prove insufficient to explain cumulative abnormal return (CAR) differences, while past returns and volatility are influential technical factors.

Practical implications

The economic significance of the results indicates a growing trend where investors prioritize companies with more substantial ESG scores, potentially driving shifts in corporate strategies toward sustainability. Better ESG performance signifies improved risk management and long-term resilience in the face of market dynamics. Regulatory bodies may respond by enhancing ESG reporting requirements, while financial institutions integrate ESG factors into their models, emphasizing the benefits of sustainability and financial performance.

Originality/value

This research contributes to the existing literature by providing a nuanced analysis of market responses to climate-related disclosures, incorporating sector-specific dynamics and cross-sectional influences. The findings offer valuable insights for businesses and policymakers, emphasizing the need for tailored approaches to climate-related disclosure management.

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股市对强制性气候变化报告的反应:马来西亚交易所的案例
本研究旨在全面了解市场对马来西亚证券交易所(Bursa Malaysia)宣布强制披露气候变化相关信息的反应,探讨特定行业的动态和横截面影响因素。行业分析进一步深入研究了不同行业之间的差异。横截面分析探讨了环境、社会和治理(ESG)评分和公司控制在解释样本公司之间差异方面的重要性。 研究结果事件研究显示,事件发生当日市场的最初反应是负面的,随后的累积影响从正面转为负面,这表明投资者情绪在不断变化。行业分析凸显了异质性效应,强调了根据特定行业特点制定量身定制策略的必要性。横截面研究结果强调了环境、社会和公司治理因素日益增长的重要性,其中公司规模和业绩影响着市场反应。财务杠杆和流动性不足以解释累计异常回报率(CAR)的差异,而过去的回报率和波动性则是有影响力的技术因素。 实际意义研究结果的经济意义表明,投资者优先考虑 ESG 得分更高的公司是一种日益增长的趋势,这可能会推动企业战略向可持续发展方向转变。更好的环境、社会和公司治理表现标志着风险管理的改善和面对市场动态的长期应变能力。监管机构可能会通过加强环境、社会和公司治理报告要求来应对,而金融机构则会将环境、社会和公司治理因素纳入其模型,强调可持续发展和财务业绩的好处。研究结果为企业和政策制定者提供了宝贵的见解,强调了对气候相关信息披露管理采取量身定制方法的必要性。
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来源期刊
CiteScore
4.30
自引率
0.00%
发文量
18
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