Does green transformation trigger green premiums? Evidence from Chinese listed manufacturing firms

To answer the question of whether the green transformation of firms can trigger green premiums plays a pivotal role in achieving the goal of carbon peak and carbon neutrality. By using 1087 manufacturing listed firms in China during 2010 and 2020, we first measure the green transformation degree of firms by extracting keywords from social responsibility reports based on text analysis. Then, the impact of overall green transformation, green strategy transformation and green action transformation on stock returns is explored by applying the fixed-effect panel model. The empirical results show that green transformation can improve stock returns, but in the long term, middle-quality and low-quality signals can be identified, and only high-quality signals can be persistent. Investor confidence instead of profitability of firms can be the influencing mechanism between green transformation and stock returns, and for different firms, the green premium brought by green transformation has heterogeneity.