Do efforts on energy saving enhance firm values? Evidence from China's stock market

- We study the relationship between energy saving and firm values.
- We use event study methodology to estimate the shock of exogenous event.
- Efforts of energy saving significantly influence firms' values and investor reactions.
- We offer important policy implications for regulators.

This paper studies the impact of energy-saving efforts on firm value, using the carbon emission rights trading scheme (CERTS) of China as an exogenous shock. The results showed that the CERTS increases the market value of energy-related firms; moreover, the energy-saving efforts of firms further influence their market value and investor reaction. Energy-related firms improve their market value and gain benefits by strengthening their energy-saving activities. This paper offers an important policy implication that the Government should enact appropriate policies to improve the energy-saving activities of firms, especially in the energy industry.