Examining Stock Market Reaction to Water Management Information
Open Access
Author:
Martinelli, Michael
Area of Honors:
Accounting
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
Brent Schmidt, Thesis Supervisor Samuel Burton Bonsall, IV, Thesis Honors Advisor
Keywords:
water management ESG cumulative abnormal returns stock market reaction event study news media RepRisk Sustainalytics SASB
Abstract:
Water management is vastly unexplored in the realm of accounting and finance research on environmental, social, and governance (ESG) topics. Water management is one of the largest ESG areas of interest for sustainable investors, so does the stock market care about the water management practices of firms? This paper examines information about the water management practices of firms and attempts to observe stock market reactions to the information. There are two forms of ESG information analyzed in this study: media news data (gathered from RepRisk) and ESG rating data (gathered from Sustainalytics). Regression analyses are run on 17 years’ worth of media news data and 11 years’ worth of ESG rating data. I find that industries where water management is a material practice softens the blow of negative news on the stock market’s reaction to the news as opposed to if water management is non-material for a firm’s industry. This finding is contrary to what is expected based on findings of past studies, signaling the relationship of the market reaction and the interaction of water management news with industry-specific materiality of water management practices as an area for future research exploration.