The Green Tobin's q: theory and evidence

We derive from a dynamic stochastic model a “Green Tobin's q” as a function of a firm's green efforts (technology and pressure), as well as traditional capital stocks and investments. The evidence focuses on the oil industry which is inextricably bound to the debate on climate change. Our...

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Bibliographic Details
Published in:Energy economics 2022-06, Vol.110, p.106033, Article 106033
Main Authors: Faria, João Ricardo, Tindall, Greg, Terjesen, Siri
Format: Article
Language:English
Subjects:
Capital
Capital stock
Climate change
Energy economics
Energy transition
Firm investments
Green patents
Oil and gas industry
Petroleum industry
Shareholder proposals
Stochastic models
Stochasticity
Stockholders
Stocks
Technology
Tobin's q
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Summary:We derive from a dynamic stochastic model a “Green Tobin's q” as a function of a firm's green efforts (technology and pressure), as well as traditional capital stocks and investments. The evidence focuses on the oil industry which is inextricably bound to the debate on climate change. Our regression results indicate a negative impact on Tobin's q from green technologies, and a positive impact on Tobin's q from green stockholder pressure. In addition to adding a theoretical model, we provide empirical evidence regarding pressing issues in the energy transition. •Theory to evaluate green initiatives by profit maximizing firms.•Negative impact of climate mitigation technologies on oil firms' market value.•Positive influence of climate proposals by shareholders on oil firms' market value.•Partial explanation of investor's (lack of) response to green investments by oil firms.
ISSN:0140-9883
1873-6181
DOI:10.1016/j.eneco.2022.106033