Do resource consent announcements provide valuable information? Evidence from New Zealand

Investor access to timely, financial resource consent information is problematic, consequently the purpose of this paper is to investigate the economic importance of New Zealand resource consent announcements to the stock exchange.

The authors apply event study methodology and cross‐sectional rank regression using a sample of resource consent announcements from 1993 to 2007.

Evidence of excess return volatility is found both on and before resource consent announcement dates. The results show that stock market reactions to resource consent announcements are positive for news of successes and negative for news of setbacks. Uncertainty associated with resource consent announcements appears to contribute to a delayed negative market response. In contrast, price reactions to announcements of resource consent success are immediate and significantly positive only when the news is concurrently disseminated via the media.

The findings imply that resource consent announcements are newsworthy and provide valuable information to the stock market regarding future regulatory compliance costs. Media dissemination is suggested to play an important role in the price‐adjustment process for news of resource consent successes. Given the increasing prominence of environmental compliance issues, the authors suggest that more informative disclosures regarding the types of consent(s) sought, the dollar value of expected compliance costs, expected time to gain consent, project investment costs and consent conditions imposed, would better assist investors to assess the economic impact of firm capital expenditures.

This study adds evidence to the literature on the role of environmental disclosures in disseminating information and reducing information asymmetry and offers suggestions to enhance the informativeness of environmental disseminations.