The Korea Local Administration Review

This study aims to investigate the effect of the green company designationon financial performance and stock return in Gyeonggi Province, South Korea.The financial performances of green companies, such as growth, profitabilityand stability, are reviewed before and after the designation. This studyconducts an event study with stock return. While the results of growth andprofitability show that there are mid-term positive effects, that of stability hasshort- and mid-term negative effects. The result of event study demonstratesthat the designation became statistically significant on the 22nd day andbetween the 42nd-103rd days after the designation. To improve and publicizethe effects of the designation, we suggest the green companies should befurther encouraged. In addition, central and local governments should makepolicies toward enhancing financial incentives and awards to the designatedcompanies, and making speedy announcements of the designation to the public.
Keywords: Green company, Gyeonggi Province, financial performance, stock return