Green investing, information asymmetry, and capital structure / Shasha Li, Biao Yang ; editor: Halle Institute for Economic Research (IWH) - Member of the Leibniz Association
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Green investing, information asymmetry, and capital structure
Discovery
1865712507
URN
urn:nbn:de:gbv:3:2-995856
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Publication history
Halle (Saale), Germany : Halle Institute for Economic Research (IWH) - Member of the Leibniz Association, October 2023
Content
1 Online-Ressource (III, 43 Seiten, 1,23 MB) : Diagramme
Edition
Language
eng
Comment
Literaturverzeichnis: Seite 31-34
Abstract
We investigate how optimal attention allocation of green-motivated investors changes information asymmetry in financial markets and thus affects firms‘ financing costs. To guide our empirical analysis, we propose a model where investors with heterogeneous green preferences endogenously allocate limited attention to learn market-level or firm-specific fundamental shocks. We find that a higher fraction of green investors in the market leads to higher aggregate attention to green firms. This reduces the information asymmetry of green firms, leading to higher price informativeness and lower leverage. Moreover, the information asymmetry of brown firms and the market increases with the share of green investors. Therefore, greater green attention is associated with less market efficiency. We provide empirical evidence to support our model predictions using U.S. data. Our paper shows how the growing demand for sustainable investing shifts investors‘ attention and benefits eco-friendly firms.
Series
IWH-Diskussionspapiere ; no. 20 (October 2023) ppn:837399270