Open AccessSTOCK MARKET REACTIONS TO REGULATORY EVENTS ON EMISSION TRADING: EVIDENCE FROM THE EUROPEAN AIRLINE INDUSTRY
Author(s) -
İsmail Çağrı Özcan
Publication year - 2019
Publication title -
business and management studies: an international journal
Language(s) - English
Resource type - Journals
ISSN - 2148-2586
DOI - 10.15295/bmij.v7i2.1104
Subject(s) - business , european union , aviation , valuation (finance) , stock (firearms) , emissions trading , event study , stock market , destinations , stock exchange , international economics , finance , international trade , industrial organization , financial economics , economics , tourism , geography , climate change , ecology , context (archaeology) , engineering , biology , aerospace engineering , archaeology
The inclusion of international aviation emissions into the European Union Emission Trading Scheme starting from 2012 is expected to bring additional costs to flights having either origins or destinations at a European Union airport. In turn, this should bring new costs to airlines. The aim of this paper is to analyze how financial markets reacted to the official announcements on this regulatory change. Our findings, using an event-study methodology and employing a sample of 20 European airlines’ stocks, reveal that the stock markets tend not to take these regulatory changes into account in the valuation of the European airlines’ stocks. We also document that the magnitude of the reaction of low-cost airlines is not statistically significant than that of full-service network airlines’ reaction.