THE 2016 U.S. ELECTION UPSET AND ITS IMPLICATIONS FOR U.S. CLEAN COMPANIES: AN EVENT STUDY

Abstract

This research investigates the stock market reactions of major publicly-traded environmentally-focused companies following the surprise outcome of the 2016 U.S. presidential election using event study methodology. Furthermore, three samples of clean companies are selected based on market valuation (small-capitalization, mid-capitalization, and largecapitalization) to test whether firm value plays a role in a security’s reaction. This research then proceeds with testing whether environmentally-focused companies experienced statistically significant negative abnormal returns following the surprise outcome of the 2016 U.S. election. Results indicate that small-sized companies suffered negative abnormal returns on event day that quickly recovered post-event. Mid-sized companies also experienced negative abnormal returns on event day but drastically recovered to finish in strong positive territory. Large capitalization companies also had negative abnormal returns on event day, which persisted for at least ten post-event days. The resulting evidence, although statistically fragile, leads to the rejection of the stated hypothesis.