TITLE:
Environmental Protection Investment and Market Value
AUTHORS:
Jiaojiao Zhang
KEYWORDS:
Environmental Protection Investment, Market Value, Earnings Persistence, Cost of Equity Capital
JOURNAL NAME:
Modern Economy,
Vol.10 No.2,
February
13,
2019
ABSTRACT: With the increase of environmental supervision in
China, environmental protection investment has become an inevitable investment
choice for polluting enterprises. However, whether environmental protection
investment can bring value to the enterprise has always been a hot topic of
debate. The paper takes the 2008-2016 China A-share heavy polluting industry
listed companies as the research object, tests the correlation between
environmental protection investment and market value. Using the Ohlson
valuation model, it is found that environmental investment has a positive
impact on the market value. Further,
the paper examines two possible paths of environmental investment impact on
market value, and the results show that environmental protection investment
increases the earnings persistence, but has no significant impact on the cost
of equity capital. Therefore, it is concluded that environmental protection
investment is conducive to the increase of market value, and the mechanism of
environmental protection investment affecting market value is to improve the
sustainability of earnings.