Stock market reactions to ESG policy announcements: evidence from Korea

Abstract

Global environmental issues, including climate change, have long been subjects of intense debate and concern. This study evaluates the impact of environmental policy announcements on Korean publicly traded stocks from 2008 to 2023. Grounded in the previous theoretical frameworks, it investigates the interplay between environmental policies and the financial performance of companies listed on the KOSPI. The research employs the event study method, analyzing stock returns in relation to announcements of 'Low-carbon Green Growth' and other major green policies, including the effects on companies with varying environmental impacts, greenhouse gas (GHG) costs, and ESG scores. The study extends previous research by testing three distinct hypotheses within the Korean market, examining the broader influence of green policy announcements on industry-grouped stocks.