The Pollution Premium

• 成果类型: Article; Early Access
• 署名作者: Hsu, Po-Hsuan; Li, Kai; Tsou, Chi-Yang
• 署名单位: Tsinghua University; Peking University; Peking University Shenzhen Graduate School (PKU Shenzhen); University of Manchester; Alliance Manchester Business School; Peking University Shenzhen Graduate School (PKU Shenzhen); Peking University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13217
• 发表日期: 2023
• 关键词: research-and-development; CORPORATE SOCIAL-RESPONSIBILITY; financial constraints; cross-section; development investment; political uncertainty; VALUE-RELEVANCE; asset prices; STOCK; RISK

摘要

This paper studies the asset pricing implications of industrial pollution. A long-short portfolio constructed from firms with high versus low toxic emission intensity within an industry generates an average annual return of 4.42%, which remains significant after controlling for risk factors. This pollution premium cannot be explained by existing systematic risks, investor preferences, market sentiment, political connections, or corporate governance. We propose and model a new systematic risk related to environmental policy uncertainty. We use the growth in environmental litigation penalties to measure regime change risk and find that it helps price the cross section of emission portfolios' returns.