An Empirical Research On The Market Reaction To The Environmental Disclosure

With the rapid development of economic, the environmental problems are becoming more and more serious. So the only way to solve the problem between economic development and environment protection is to work out a sustainable strategy. The key part of the sustainable strategy is enterprises' behavior. They should protect environment and control pollution when pursuing the maximum profit. Environment disclosing is an independent and effective way to control pollution by transfer the information to the public. In western developed countries, many companies have been disclosing their environmental information from long time ago for the reason of competition and public pressure. Chinese government has adopted some measures, which have a great reaction in the society, to promote Chinese enterprises' environmental disclosure. In this paper, the problem of whether the stock market can react to the environmental disclosure events or not, will be studied.At first, the foreign research history of environmental disclosure, the empirical research of environmental disclosure and the Chinese recent research of environmental disclosure are reviewed. Then the relative contents of environmental disclosure about this research are introduced. On the base of previous work, the research method is designed. Event study method, which is a mature method to investigate the relationship between stock prices changes and the information disclosure, is used to study the market reaction to the environmental disclosure.71 environment disclosure events, which include 23 negative environmental disclosure events and 48 positive environmental disclosure events, are collected from 2002-2005's Chinese Stock as the research sample.In order to investigate whether the stock market react to the environmental disclosure events, the abnormal return of stock prices (ARit), the average abnormal return of stock prices (AARt) and the accumulate average abnormal return of stock prices (CAART) are computed and statistical tested. The results indicate that, at present, the stock market don't react to the environment disclosure events as a whole in China. But several specific environment disclosures can make the stock prices have significant changes.