Does investors’ valuation of corporate environmental activities vary between developed and emerging market firms?

Abstract

We compare the market reactions of developed and emerging market firms to reconstitutions of the FTSE Environmental Opportunities (FTSE EO) index. Our primary finding is that developed market firms that were added to or deleted from the FTSE EO experience significant increases in stock prices and trading volumes even after controlling for institutional ownership and size effects. In contrast, emerging market firms experience declines in both stock prices and trading volumes.