The 370th Wenlan Financial Forum

Abstract:Pricing firms’ environmental risk is central to ensuring that capital is efficiently allocated in the presence of environmental externalities. We examine whether heightened salience of pollution information affects analysts’ beliefs and valuations. Using China’s staggered monitoring rollout, we find that treated-city analysts become more likely to discuss air pollution than untreated-city analysts covering the same firms, despite identical data access. Following treatment, analysts become more pessimistic on brown firms (lower forecasts, target prices, ratings, and more negative tones) and opposite for green firms. Stock prices respond negatively to treated analysts’ reports on brown firms and positively on green firms, with no reversal later. Earnings announcements generate smaller abnormal returns, suggesting improved pricing rather than behavioral biases. Our findings suggest that ambient environmental monitoring can serve as a powerful policy tool for incorporating environmental risk into asset prices by increasing the salience of such risk.

Speaker Introduction：

Pengdong Zhang, Associate Professor and Doctoral Supervisor at the School of Business, Sun Yat-sen University. He is a Chinese Certified Public Accountant (CPA) and a Chartered Financial Analyst (CFA). His main research interests include corporate finance, information disclosure, and auditing. His papers have been published in leading domestic and international journals such as the Journal of Accounting and Economics, Journal of Economic Behavior & Organization, Journal of Corporate Finance, Journal of Business Finance & Accounting, The British Accounting Review, Economic Research Journal, Accounting Research, Journal of Financial Research, China Industrial Economics, and Journal of Management Sciences in China. He has served as principal investigator for multiple research grants, including the General Program and the Young Scientists Fund of the National Natural Science Foundation of China (NSFC), the General Program of the Natural Science Foundation of Guangdong Province, and the Philosophy and Social Sciences Planning Project of Guangdong Province. He also serves as an anonymous reviewer for journals such as the Journal of Accounting and Economics, Contemporary Accounting Research, and Research Policy.