[Published in Strategic Planning for Energy and the Environment, Vol. 17(1), pp. 38-51, 1997]..and re-published in several other journals...
When Firms Publicize Energy Management Projects Their Stock Prices Go Up: How High? – As much as 21.33% within 150 days of an Announcement!
John R. Wingender, Jr. and Eric A. Woodroof
Abstract:
When selecting projects under a limited budget, a firm should implement the project that will return the most value. Ultimately, firm value is measured by stock price, which can be impacted when the firm makes a major announcement. This paper shows that announcements of energy management projects correlate with a 21.33% increase in stock price within 150 days of the announcement. This increase is in addition to the risk-adjusted return the firm would normally experience. For example, during a “bull market” a firm’s expected return was 10%. After the announcement, the return would increase by 21.33%, for a net return of 31.33%. These results suggest that investors react positively to energy management projects. This outcome demonstrates one more strategic incentive for firms to implement energy management projects.