Lyon examines effect of Newsweek’s Green Companies rankings
Senior Policy Scholar Tom Lyon has co-authored “Environmental Disclosure: Evidence from Newsweek‘s Green Companies Rankings” with Jay Shimshack. The paper, appearing in Business and Society, finds “the rankings had a significant impact on shareholder value.”
The authors find that the 2009 Newsweek rankings had a substantial impact. Highly rated firms had abnormal returns following the disclosure event that were 0.6%–1.0% higher than the returns of firms rated poorly. We also find that the form of the information disclosed mattered a great deal. Only the aggregate 1–500 rankings mattered; more nuanced individual met- rics like overall green score, environmental impact score, or environmental policy score had no independent market impact. Finally, we find suggestive, but not definitive, evidence that private politics (activist pressure) and public politics (regulator pressure) channels provide the most compelling link between the Newsweek rankings and observed financial market outcomes. While our channel explorations do not necessarily shed light on mechanisms driving other information settings, our analysis does provide a roadmap for future research in the area.
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