The Effect of CO₂ Gas Emissions on the Market Value, Price and Shares Returns

Abstract

One thing that should be considered in environmental considerations and climate change is the transportation sector’s contribution to producing carbon dioxide. Unfortunately, in developing countries such as Iran, due to high tariff support, manufacturers have no incentive to improve the combustion quality of their products. Most likely, significant restrictions on CO2 emissions will be applied in the coming years, and companies whose activities or products are related to high-level greenhouse gas emissions will be affected by these restrictions. Therefore, due to the application of these restrictions, investors are most concerned about the risk associated with the return of purchased shares. Considering these cases, it can be expected that the risk related to carbon emissions will be reflected in the yield level and, thus, the stock price. Therefore, the present study deals with the effect of CO2 gas emissions on the market value, price and stock returns of Iranian automobile companies. The data collected as tabular data include six automobile companies from 2018–2019. By conducting various tests and panel data estimations, especially the dynamic panel data method, it was determined that CO2 emissions reduce stock prices, returns and market value of automobile companies. In addition, the results of the causality test indicate that the direction of causality is only from CO2 emissions to stock returns.

Keywords

• market value
• stock price
• stock yield
• CO₂ emissions
• dynamic panel data