Title: Regulatory changes and market reactions the European renewable energy market

Authors: Julian Trillig

Addresses: Technische Universität Darmstadt, Rechts- und Wirtschaftswissenschaften, Lehrstuhl für Unternehmensfinanzierung, Hochschulstrasse 1, 64289, Darmstadt, Germany

Abstract: Political directives intended to push forward the transformation of the European energy sector from the utilisation of conventional to renewable resources can be seen as regulatory acts and therefore prompt debate about the impact on the risk/return profile of the companies affected. This paper investigates whether political decisions influence the risk/return-profile of young technology-based companies from the cleantech industry. As a first step, we apply an event study approach in order to examine the impact of regulatory announcements on the company|s market value. As a second step, a time-varying beta calculation is used to determine the changes in the systematic stock return risk of the company. The results concord with theoretical findings in general. The stricter the regulation, the more negative the company|s abnormal stock return and the higher the systematic risk, and vice versa.

Keywords: regulation; renewable energy; regulatory changes; market reactions; conventional resources; renewable resources; regulatory acts; risk-return profile; political decisions; politics; technology-based companies; cleantech industries; clean technology; regulatory announcements; market values; time-varying calculations; beta calculations; systematic risks; stock return risks; abnormal stock returns; EC Directives; European Parliament; Council of Europe; European Union; electricity generation; internal markets; Germany; France; Switzerland; Belgium; small and medium-sized enterprises; SMEs; entrepreneurs; entrepreneurship; interdisciplinary research.

DOI: 10.1504/IJESB.2012.044592

International Journal of Entrepreneurship and Small Business, 2012 Vol.15 No.1, pp.116 - 129

Published online: 29 Dec 2011 *

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