Year: 2024
Type: dissertation
Abstract: Sustainability and corporate sustainability rankings continuously gain stature due to growing regulation and investor interest; measuring sustainability and linking it to financial performance is vital for company management. This thesis seeks to further clarify the existing literature in the field, which currently provides mixed results regarding index reformation and sustainability. This study employs a short-term event study methodology with the Fama-French three-factor model and the Adjusted BMP test to recognize arising abnormal returns. The research investigates the short-term price reaction of companies to the listing and removing of firms in the DJSI World. The study focused on the DJSI world index from 2012 to 2020 and the analysis contained 630 unique securities with an estimation window of 120 days. The studied short-term event length varied from -3 to +3 days. \n \nThe analysis indicates that even when both construction events, additions, and deletions showed a tendency towards negative abnormal returns, the cumulative average abnormal returns resulted to be statistically insignificant for the events considered. This conclusion contests the possible hypothesis that listing into or removal from the DJSI World leads to significant acceptable abnormal stock returns. The conclusions of this study propose that investors do not consistently reward sustainability performance in the short term or that investors could value sustainability more in the long term.
Source: LUTPub (LUT University)
Author: Lumioksa, Pyry
Institution: Lappeenranta-Lahti University of Technology
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7071857640