Do environmental regulations undermine energy firm performance? An empirical analysis from China’s stock market

This paper examines the impact of environmental regulations on the stock price of listed fossil based energy companies in China. Based on the event study methodology, we found that environmental regulations have a variety of impacts on the stock prices of China’s listed fossil based energy companies. While legislative regulation has negative impacts on the stock prices, both environmental information disclosure (EID) and administrative regulation have positive impacts, and the impacts of market-based regulations (MBR) are firstly positive, then become negative. Further, the negative impacts of legislative regulation and the positive impacts of EID are the greatest. These results suggest that close attention should be paid to EID by policy makers. Moreover, we found that the impacts on firms vary depending on their nationalization level and scale. A surprising finding is that the negative impacts of environmental regulations are greater on listed fossil based energy companies with higher level of EID than on those with lower level of EID, which poses a challenge for policy makers in designing EID policies.