Renewable energy certificates and firm value: Empirical evidence in Taiwan

The Renewable Energy Certificate (REC) has been considered as an innovative technology for a green society. Many firms look to reduce carbon emissions and improve their environmental, social, and governance (ESG) performance using RECs. However, the impact of REC purchases on the value of firms remains unclear. This study investigates the effect of REC purchases on the stock return and volume of all REC buyers in Taiwan between 2017 and 2021. The sample consists of 266 REC transactions in the trading market. We find a positive effect of firms' REC purchases on its stock returns in manufacturing but not the service industry. Moreover, the frequency of REC purchases is an important factor in the relationship between REC purchase and firm value. This study also investigates the underlying mechanisms of these effects. We find that public attention paid to environmental pollution is the most crucial factor associated with positive stock return and volume of a firm, while ESG disclosure is negatively associated with returns and volume.