Environmental backsliders, repeat offenders and capital markets: Evidence from India
Gupta S. Goldar B. Dang S. Baris O.F.
October 2025Elsevier B.V.
Economics Letters
2025#256
Regulatory rollbacks raise a critical question for emerging markets: do investors discipline firms that relapse on environmental performance? We combine the two public rounds of Indias Green Rating Project (GRP) for 17 mills in the paper-and-pulp sector with a variance-robust event study. We uncover a double-digit market penalty for environmental backsliding (decline in green rating), proving that investors care about a firms trajectory, not just its current score. Plants that improve or maintain ratings experience no significant abnormal return. Periodic, third-party performance evaluation and rating programs can leverage capital-market discipline to compensate for persistently weak regulation in emerging markets or for regulatory rollback as observed in the U.S., Brazil and Europe.
Environmental performance , Event study , Green rating , Repeat offenders
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Centre for Social and Economic Progress, 6, Jose P. Rizal Marg, Chanakyapuri, New Delhi, 110021, India
Lee Kuan Yew School of Public Policy, National University of Singapore, Singapore
Indraprastha Institute of Information Technology, New Delhi, India
Institute of Economic Growth, University Enclave, Delhi, 110007, India
Microsoft India Development Centre, Uttar Pradesh, Noida, India
Nazarbayev University, of Public Policy, 53 Kabanbay Batyr Ave Astana, 010000, Kazakhstan
Centre for Social and Economic Progress
Lee Kuan Yew School of Public Policy
Indraprastha Institute of Information Technology
Institute of Economic Growth
Microsoft India Development Centre
Nazarbayev University
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