Corporate green transformation and stock returns: evidence from Chinese listed manufacturing firms

Researchers debate whether corporate green transformation reduces stock returns or improves financial performance. By using 907 manufacturing listed firms in China from 2010 to 2022, this paper measures the degree of corporate green transformation by extracting keywords from social responsibility reports based on text mining and empirically examines the effect of corporate green transformation on stock returns by applying the fixed-effect panel model. The results show that the green transformation of corporates has a negative impact on stock returns. Second, the moderating mechanism analysis demonstrates that corporate green transformation can reduce stock returns by increasing operating costs and reducing investor confidence. Third, heterogeneous analysis shows that the negative impact of corporate green transformation on stock returns is more significant for non-state-owned firms, firms in non-low-carbon pilot cities, and firms in non-heavily polluting industries during periods of poor economic environment. Further analysis shows that corporate carbon emissions have a significant positive impact on green transformation. This study enriches the exploration of the economic consequences of corporate green transformation. Our empirical findings suggest important policy implications.