Effects of the Emissions Trading Scheme on Corporate Value: Effects by Plan Period

Purpose - This study analyzes whether the effects of an Emissions Trading Scheme (ETS) on a firm's value are differentiated in each planning period (1st, 2nd). Design/Methodology/Approach - This study analyzes firms listed on the Korean Stock Exchange (KSE), and the analysis period is from 2015 to 2020. The sample taken for this study includes 3,871 firm-year observations. Findings - First, the effects of an ETS on a firm’s value are not found during the 1st planning period, but a firm’s value due to ETS is found to decrease during the 2nd planning period. Second, the value of an ETS company with high carbon intensity does not decrease in either the 1st or 2nd planning periods. Third, the value of ETS firms with high energy efficiency is increased during the 1st plan period. This study found that investors are aware of the implementation of ETS by plan period, but do not understand the characteristics of ETS companies by reduction investment. Research Implications - This is meaningful as the first study to verify that the effect of an ETS on a firm’s value differs between planning periods. The results of this study will provide important implications for ETS improvement and the environmental information disclosure policies for investors.