By Inhwan Ko &
August 11, 2024
Source: Nature
Photo / Image Source: Unsplash,
Weighted two-way fixed effects
Finally, we report the results from weighted two-way fixed effect models (Table 2). Here, we also estimate four models, and each model compares non-members (Tier 5) with four groups of SBTi members, which vary by membership type (Tiers 1–4). We use the logarithmic transformation of firm size, total assets, total liabilities, and total market value to account for non-linearities across observations. We also include industry-fixed effects to account for the between-industry heterogeneity in the stock prices.
Consistent with the results from the two previous steps, the weighted two-way fixed effect models do not suggest that firms that joined SBTi (in any tier) experienced an increase in their stock market prices after joining it. However, our findings on the effect of the SBTi on stock prices need to be interpreted carefully. First, we focus on S&P 500 companies only. So, the results are not generalizable across all firms. Second, the number of treated firms (particularly in tiers 2 and 3) is small compared to that of firms in the control group. The solution to both these limitations is eventually expanding the sample beyond the S&P 500.
Ko, I., Prakash, A. Stock markets, corporate climate pledges, and the Science-Based Target Initiative. npj Clim. Action 3, 69 (2024). https://doi.org/10.1038/s44168-024-00148-8
Received05 April 2024
Accepted24 July 2024
Published11 August 2024
DOIhttps://doi.org/10.1038/s44168-024-00148-8
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