Author(s): Dhanush M N, Shivakashi Sharma, Haresh Barot
The current research examines the stock market's reaction to 30 corporate Net Zero commitment announcements in India from 2020 to 2025. While the aggregate short-term abnormal return is statistically insignificant 11-day CAAR = -0.08, p = 0.940, this neutrality masks a powerful underlying dynamic: market learning. The research document a stark time-varying reaction. Early announcements 2020–2021 were met with significant market enthusiasm Mean CAR = +3.03, a period characterized by high return variance. This reaction reversed dramatically in subsequent years 2022–2023: Mean CAR = -2.85, as the market converged on a new, skeptical consensus. This finding suggests investors initially rewarded the signaling value of climate commitments but, with experience, became more discerning, focusing on implementation costs and greenwashing risks. We find significant cross-sectional heterogeneity, with the Energy sector facing the most severe penalties Mean CAR = -3.38. While statistically insignificant due to low power, the research documents a large economic long-term negative drift, with 12-month Buy-and-Hold Abnormal Returns BHAR of -5.98. This study provides the first large-sample evidence from India, demonstrating that market reactions to ESG commitments are not static and that investors in emerging markets are actively learning and re-evaluating the credibility of corporate climate pledges.