The Stock Market's Anticipation of the Trump 2024 Election: The Case of Sustainable Business Models

Koch, Dennis; Schiereck, Dirk Article — Published Version The Stock Market's Anticipation of the Trump 2024 Election: The Case of Sustainable Business Models Business Strategy and the Environment Provided in Cooperation with: John Wiley & Sons Suggested Citation: Koch, Dennis; Schiereck, Dirk (2025) : The Stock Market's Anticipation of the Trump 2024 Election: The Case of Sustainable Business Models, Business Strategy and the Environment, ISSN 1099-0836, Wiley, Hoboken, NJ, Vol. 34, Iss. 6, pp. 7938-7956, https://doi.org/10.1002/bse.4371 This Version is available at: https://hdl.handle.net/10419/329776 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Business Strategy and the Environment, 2025; 34:7938–7956 https://doi.org/10.1002/bse.4371 7938 Business Strategy and the Environment RESEARCH ARTICLE OPEN ACCESS The Stock Market's Anticipation of the Trump 2024 Election: The Case of Sustainable Business Models DennisKoch | DirkSchiereck Technische Universität Darmstadt, Darmstadt,Germany Correspondence: Dirk Schiereck ([email protected]) Received: 19 February 2025 | Revised: 29 April 2025 | Accepted: 18 May 2025 Keywords: ESG| event study| green revenues| stock price reactions| sustainability| Trump| US election ABSTRACT This study examines the impact of green revenues on US stock price reactions around Donald Trump's 2024 election win. Firms' green revenue share (GRS) is significantly associated with negative cumulative abnormal returns (CARs) postelection, exhibiting a nonlinear effect that intensifies at higher GRS levels. However, stock markets showed no anticipating revaluation of green business models during the weeks before the election. Instead, investors reacted sharply to two unanticipated key preelection events, the Trump assassination attempt and Harris' candidacy announcement, highlighting sensitivity to anticipated shifts in green policy. Remarkably, the revaluation of green business models did not take place uniformly across the entire country. The state political environment moderates this effect, as green firms in Democratic states experienced more negative CARs than those in Republican states. 1 | Introduction On the day of his inauguration as 47th president of the United States on January 20, 2025, Donald Trump immediately set his political agenda into motion by signing numerous executive orders. Among his first actions, he withdrew the United States from the Paris Climate Agreement and revoked executive orders of the previous Biden administration supporting clean energy industries and electric vehicle targets. In addition, he declared a national energy emergency to roll back environmental protection and accelerate oil, gas, and power projects, as well as imposed a ban on the construction of new offshore wind parks along the entire US East Coast (The White House2025).1 In the runup to the election, Trump campaigned on this policy turnaround, promoting oil and gas industries while halting the clean energy momentum and promised to continue the agenda he had initiated during his first term in office (BBC2024b). His 2016 election was widely regarded as a political shock, with financial markets reacting strongly to the largely unexpected outcome. In particular, investors responded positively to brown, carbonintensive firms while expressing uncertainty over the future of green businesses (Pham etal.2023; Ramelli etal.2021b). By contrast, the 2024 election presented a different dynamic. Polling data and betting markets indicated that a second Trump presidency was a probable outcome, and his policy stance on energy and environmental deregulation was well known (BBC 2024a; RealClear Polling 2024; The Economist 2024). Given this difference in expectations, the key question arises if and how financial markets still reacted to Trump's election win in 2024 and thus priced in the political change beforehand. Trump's return to office in 2025 came amid deep political polarization in the United States. The divide between Republicans and Democrats had widened in recent years, and Trump had repeatedly signaled his willingness to pursue retributive actions against political opponents (CNN 2025). At the same time, Trump's pledge to repeal the Inflation Reduction Act (IRA) adds another layer of uncertainty. Although the IRA was designed to accelerate the green transition, the majority of its economic benefits, such as subsidies for renewable energy This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited. © 2025 The Author(s). Business Strategy and the Environment published by ERP Environment and John Wiley & Sons Ltd. 7939 projects and electric vehicle production, flow to Republicanleaning states (Brookings Institution 2025). This raises questions about whether his administration's actions would disproportionately affect Democraticleaning states and whether the state political environment influenced how financial markets reacted to Trump's victory, particularly with regard to green firms. To address these questions, this study examines how firms' green revenues influenced stock price reactions to Trump's return to office. By analyzing these market responses, we aim to understand how investors priced the expected policy shift against green businesses and whether the political environment at the state level played a role. This provides critical insight into how financial markets evaluate the shifting landscape for sustainabilitydriven firms in a polarized political landscape. We utilize green revenues,2 which measure firms' revenue exposure to environmentally sustainable business models, as key explanatory variable to study the market reaction to the election outcome. This variable provides a valuedriven perspective on firms' environmental strategies, reflecting the greenness of their business models rather than their corporate conduct. In the context of our study, assessing the impact of worsened market conditions for environmentally sustainable businesses, green revenues serve as the most suitable and novel measure compared to commonly used CO2 variables or ESG scores. Furthermore, this study adds novelty by extending the event study beyond the election itself and examining stock price reactions to two preceding key events: the Trump assassination attempt on July 13, 2024, and Kamala Harris' announcement on July 21, 2024, to run as the Democratic candidate. These events offer valuable opportunities to observe investor sentiment shifts as the likelihood of a Trump presidency fluctuated in an entirely unforeseen manner. Our findings reveal that a firm's green revenue share (GRS) is significantly associated with negative stock price reactions following Trump's election win, highlighting a deteriorated market outlook for environmentally sustainable business models under his presidency. We find that US firms generating green revenues exhibit 2.3 percentage points lower cumulative abnormal returns (CARs) 10 days after the election than firms not engaging in any green activities. GRS exercises a nonlinear effect on CARs, where higher levels of green revenue exposure experience an amplified negative impact on market valuation. The political environment of the firms' home states moderates these effects, resulting in significantly larger negative returns for green firms in Democraticleaning versus Republicanleaning states. A sectoral analysis of GRS reveals variation, with the most substantial effects observed for green revenues stemming from environmental support services, such as green financing and consulting, as well as energy equipment and generation. After the two events preceding the election, investors of US firms rapidly incorporated the changing prospects of the election outcome. Following the Trump assassination attempt, which increased the perceived odds of him winning the election, investors heavily punished companies with high GRS. Conversely, Harris' announcement, sparking new momentum for the Democratic Party, triggered shortlived positive returns to GRS. Our study makes several key contributions to the literature. It is the first one to analyze market reactions to political events with green revenues as a key regressor, offering a novel perspective on how investors perceive environmentally sustainable business models in the context of shifting political and regulatory environments. By examining the renewed Trump election, which did not present the same unexpected shock as in 2016, this paper highlights how even anticipated events can still trigger strong market reactions, particularly for green businesses. Moreover, our study incorporates an analysis of two key events preceding the election, demonstrating how these sudden events affect stock prices as they influence the likelihood of the election's outcome. Finally, our study incorporates an analysis of the state political environment, revealing that investor reactions to green revenues are significantly shaped by whether firms are headquartered in Democraticleaning or Republicanleaning states. This research thus significantly extends the recent literature on event studies analyzing the impact of US election outcomes (e.g., Child etal.2021; Hachenberg etal.2017; Ramelli etal.2021b), contributes to the broader findings on the impact of environmental sustainability on stock returns during political shifts (e.g., Mueller etal.2023a; Mueller etal.2023b; Pham etal.2023; Ramelli et al. 2021a; Teutrine et al. 2024), and adds to the emerging body of research on the impact of green revenues (e.g., Bassen etal.2023; Klausmann etal.2024). Overall, this study presents a novel perspective on how political developments shape market dynamics, revealing the heightened vulnerability of green business models and the influence of firms' local political environment amid deep political polarization in the United States. 2 | Literature Review and Research Questions 2.1 | Stock Price Reactions to US Elections and Climate Policy Events Previous papers have documented the influence of US presidential elections and corresponding policy changes on stock returns. The 2016 election of Donald Trump as US president was widely regarded as a political shock, as it was largely unexpected and presented a sharp contrast to previous policy. A study by Hachenberg etal.(2017) examines the impact of the 2016 surprise election outcome on banks' shareholders and bondholders. The authors find that, in anticipation of deregulation in the financial sector, US bank shareholders benefited from significantly positive abnormal stock returns, whereas debtholders experienced increases in CDS spreads, reflecting heightened credit risk. Ramelli et al. (2021b) investigated the role of environmental sustainability, an area particularly affected by US policy changes, on stock returns during the 2016 and 2020 US elections. Using sustainability scores and emissions intensity as key regressors, the authors find that climatefriendly firms 7940 Business Strategy and the Environment, 2025 with higher sustainability scores and climateunfriendly firms with high emissions intensity both experienced significant positive stock returns after Trump's surprise election. The authors attribute this finding to the differing investment horizons of investor groups. Specifically, they demonstrate that shortterm investors drive the pricing effect of emissionintensive firms, whereas longterm investors exercise buying pressure on climatefriendly firms in anticipation of an even stricter environmental regulation in a postTrump era. Such boomerang in climate policy eventually occurred following the 2020 US election. Promising a renewed momentum in environmental efforts, Biden's election win triggered substantial value increases for climateresponsible stocks. Similarly, Pham etal.(2023) analyzed the impact of major climate policyrelated events on stock returns of US green firms included in the NASDAQ OMX Green Economy Index, a basket of companies focused on environmentally sustainable business models. The study finds significant positive stock reactions to favorable climate policy events, such as Biden's election confirmation, the Biden climate change bill, and the adoption of the Paris agreement in 2015. Conversely, unfavorable events, including Trump's election confirmation and the US withdrawal from the Paris agreement, are associated with insignificant negative return reactions. Ahmed et al. (2025) provide the most recent evidence on US elections, analyzing the impact of the 2024 Trump victory on S&P 1500 stocks. The authors document significant positive CAPMadjusted returns following the election. Given the more anticipated nature of Trump's 2024 victory, these adjusted returns are, however, lower in magnitude than those observed in 2016. Moreover, crosssectional analyses show that small firms as well as firms in the manufacturing and energy industry exhibited the largest abnormal returns. 2.2 | Drivers and Stock Price Impact of Green Revenues As LSEG's green revenues are a relatively novel measure of a firm's greenness, having been first introduced in 2015, the body of research utilizing this variable is scarce (LSEG2024a). Recent studies have examined drivers of green revenue growth as well as its impact on stock returns across global markets. To begin with, Klausmann etal.(2024) analyze the evolution of green revenues and present three key channels that drove its growth in the previous decade. The authors identify regulatory push and green innovation as the first two channels, reporting accelerated growth in green revenues following the Paris Climate Agreement, driven by European regulatory initiatives, as well as by US firms converting green patents into revenues. As a third channel, the authors identify institutional ownership and report that a larger share of institutional investors, particularly climateresponsible investors, before the Paris Agreement correlates with higher subsequent green revenues. Bassen etal.(2023) investigate the pricing impact of green revenues in a global sample of firms with positive GRS from 2016 to 2020. The authors provide evidence of a green alpha and find that a portfolio of firms with higher GRS earns higher returns than a portfolio of firms with lower GRS. In a similar manner, Klausmann etal.(2024) examine the stock price impact of green revenues in a global sample from 2008 to 2022. The authors find no conclusive evidence of an overall green portfolio excess return but note that a US subsample and the postParis period from 2016 relate to a significant green alpha. 2.3 | Research Questions The US presidential election outcome was expected to significantly alter the prospects of green businesses due to anticipated shifts in subsidies, regulatory frameworks, and public perception. The two key events preceding the election, that is, the Trump assassination attempt and Harris' announcement to run as Democratic candidate, offer additional opportunities to observe investor sentiment shifts as the likelihood of the election outcome fluctuated in an unforeseeable manner. Although the presidential race could in general be perceived as eventful, we focus on these two incidents as polling data reveal that they triggered the most significant shifts in winning odds (RealClear Polling2024). Green revenues, as an indicator of a firm's exposure to environmentally sustainable business models, can be seen as particularly sensitive to the shift in US political power and associated policy. The election and preceding events hence serve as critical inflection points for investors to assess the future regulatory and economic environment for green businesses. Therefore, we aim to explore whether and how firms with higher green revenues experience differential stock returns during these events. Research Question 1. What is the impact of green revenues on stock returns around the election events? Firms' levels of green revenues vary and reflect different degrees of commitment to sustainability. Investors may perceive these levels differently in light of the anticipated policy changes following the election. Moderate levels of green revenues may strike a balance that signals both environmental commitment and exposure to conventional income streams, whereas very high or low levels could be associated with excessive focus or a lack of adaptability to policy shifts. Accordingly, we aim to determine whether the market reactions to green revenues follow a linear or nonlinear pattern. Research Question 2. Does the impact of green revenues on stock returns vary for different levels of green revenues? The United States is marked by significant political polarization, which shapes both policy implementation and its economic impacts. Introduced by President Biden in 2022, the IRA aims to boost clean energy investments and reduce emissions, with most of its funding benefiting Republicanleaning states (Brookings Institution2025). This raises questions about whether a Trump administration would fully roll back the IRA, particularly in Republicanleaning states receiving substantial economic benefits from it. More generally speaking, the statelevel political environment and alignment with the president's party and political views can significantly 7941 influence firms through policy support, regulatory leniency, or subsidies. Given these dynamics, we explore whether a firm's state political environment shapes how investors value its green revenues during election events. Research Question 3. Does the state political environment affect the impact of green revenues on stock returns? Last, green revenues may not be perceived as homogeneous across industries such that firms within differing green sectors may experience distinct market reactions. Additionally, firms with varying levels of greenness, that is, intensity and extent of environmental impact, denoted by the green revenue tier, may exhibit differing responses. Hence, we aim to investigate how sectoral and tier differences affect the value of green revenues after the policy events. Research Question 4. Does the impact of green revenues on stock returns vary by their sector and tier? 3 | Sample, Data, and Methodology 3.1 | Sample and Data Analogous to Ramelli et al. (2021b), our main sample consists of stocks listed in the Russell 3000 index, representing the 3000 largest US companies by market capitalization and 98% of the investable US stock universe (LSEG2024b). We retrieve the most recent firmlevel data on stock prices, accounting metrics, and green revenues from LSEG. We gratefully download daily riskfree rates and Fama–French threefactor premia for the United States from Kenneth French's webpage (French2025). 3.2 | Methodology 3.2.1 | Stock Returns The three events of interest are the attempted assassination of Donald Trump in Pennsylvania on Saturday, July 13, 2024; the announcement of Kamala Harris's candidacy for president, replacing Joe Biden, on Sunday, July 21, 2024; and the US presidential election on November 5, 2024. Since the first two events occurred on weekends, we assign the event dates (t = 0) to July 15 and July 22, respectively. For the US presidential election, as the result was called on the day following the election, we assign November 6, 2024, as t = 0. For each event, we derive and analyze raw returns as well as abnormal returns adjusted using the CAPM and the Fama–French threefactor model (FF3). We estimate CAPM beta  𝛽i and the FF3 factor loadings  𝛽1,i ,  𝛽2,i , and  𝛽3,i for each event by regressing daily stocks returns Ri,t in excess of the riskfree rate Rf,t on the respective research returns retrieved from Kenneth French's data library. We conduct the estimation over a 250day estimation window spanning from t = −260 to t = −11, considering only firms with a complete set of returns. Within our event windows, we then compute the daily expected returns along the following formulae: Last, we derive daily abnormal returns by subtracting expected returns from realized returns and calculate the CAR as the sum of daily abnormal returns over the specified window: In our main analyses, we utilize the FF3 model to adjust returns, as it accounts for the size and value factors that are particularly relevant in the context of our study. Given that the events under investigation likely affect firms differentially based on their size and valuation, with smaller and valueoriented firms potentially benefiting more from a Trump administration, adjusting for these factors allows for a more precise identification of abnormal returns. To ensure robustness, we additionally report results based on CAPMadjusted and raw returns, which yield qualitatively similar findings. 3.2.2 | Green Revenues As key explanatory variable, we employ the GRS. This metric, provided by LSEG, denotes the share of total revenues generated from environmentally sustainable products and services. It is based on reported and estimated figures on green revenues within a classification system of 10 green sectors as well as 64 subsectors.3 The data model covers over 19,000 firms in 49 countries, accounting for nearly 99% of global market capitalization, and identifies over 4000 firms with green revenues (LSEG2024a). The metric measures a firm's participation in business models within the green economy, that is, activities that aim to reduce and alleviate adverse environmental impacts. It therefore acts as forwardlooking indicator of a firm's financial exposure to current and future sustainable revenue pools. As Klausmann etal.(2024) point out, green revenues offer novel information on sustainable conduct compared to widely used variables based on CO2 emissions and environmental performance scores. Environmental scores primarily measure a firm's sustainable conduct, policies, and strategies, whereas CO2related variables depict direct emissions of the firm's operations (Scope 1) as well as indirect emissions of its upstream value chain (Scope 2). Green revenues, however, measure the contribution to sustainability through products and services sold to consumers rather than business conduct or operations. Correspondingly, Klausmann etal.(2024) highlight that these sustainability metrics exhibit a low correlation, and green revenues thus offer additional information value. Accordingly, we find a low correlation coefficient of 0.18 between GRS and LSEG's environmental pillar score and 0.04 between GRS and total CO2 intensity scaled by total revenue in our sample. 3.2.3 | Control Variables In line with related papers, we control for firm size (log of market capitalization), valuation (booktomarket ratio), profitability CAPM:E[Ri,t]=Rf,t+𝛼 i+  𝛽i(Rm,t−Rf,t) FF3 :E [ R i,t] =R f,t +𝛼 i + 𝛽 1,i( R m,t −R f,t) + 𝛽 2,i SMB t + 𝛽 3,i HML t ARi,t =Ri,t −E�Ri,t� CARi,[t1:t2] = ∑ t2 k=t1 AR i,t 7942 Business Strategy and the Environment, 2025 (ROA), growth (1year revenue growth rate), leverage (debttototal assets ratio), and industry fixed effects using the 25 GICS industry groups (Mueller etal.2023a; Ramelli etal.2021b). We winsorize all control variables except the log of market capitalization at the 1st and 99th percentiles. Thus, we use the following regression: 3.2.4 | State Political Environment We estimate the moderating effect of the state political environment with the variable state political direction spanning from 0 (i.e., strongly Republican) to 1 (i.e., strongly Democratic), taking reference from Di Guili and Kostovetsky(2014). Applying this measure on a US sample from 2003 through 2009, the authors find that firms headquartered in Democraticleaning states relate to significantly higher ESG scores than those in Republicanleaning states. Specifically, we construct the variable state political environment as a weighted average of three components. The first component comprises the popular vote result of the US presidential election 2024 and is constructed as a binary metric, coding states with a Democratic majority vote with 1 and states with a Republican majority vote with 0. The second component presents the state government and is constructed as a weighted average of Governor party affiliation (50%) as well as majority control of upper and lower state legislature chambers (25% each). We code the subcomponents 1 for Democratic Governors or house majority and 0 for Republican Governors or house majority. The third component depicts the Congress delegation and is constructed as an average of the Congressmen and Senators majority subcomponents. We code the subcomponents 1 if the majority of Congressmen or Senators from the respective state are Democrats and 0 if they are Republicans. We match the state political environment with the firms' state of headquarters. We gather statelevel presidential election results from the US National Archives, information on the Congress delegations from the House of Representatives and Senate, and state governmental data from the respective official state websites (U.S. House of Representatives2024; U.S. National Archives and Records Administration 2024; U.S. Senate2024). 3.3 | Descriptive Statistics Descriptive statistics are displayed in Table1. Our sample consists of 2397 firms with a full set of data on returns, control variables, and GRS. Out of the total, the equivalent of 24% (i.e., 573 firms) have a GRS greater than zero. The average GRS across all firms is 7%, whereas the 576 firms with GRS > 0 exhibit an average share of 29%. Two thousand two hundred ninetysix of our sample firms are headquartered in the United States, of which 1295 in mostly Democratic or neutral states (i.e., state political direction > = 0.5) and 1001 in mostly Republican states (i.e., state political direction < 0.5). 4 | Event Study Results 4.1 | Trump Assassination Attempt on July 13, 2024 We begin our analyses by investigating the stock price impact of green revenues after the Trump assassination attempt that occurred on Saturday, July 13, 2024, near Butler, Pennsylvania. To illustrate the effect of this event and the Harris candidacy announcement, we build four equalweighted portfolios with differing GRS cutoffs and plot their FF3adjusted CARs in Figure1. The 10 trading days preceding the assassination attempt exhibit some volatility in GRS, with an initial downward trend followed by a strong upward movement. However, this upward momentum was abruptly interrupted by the incident. In the 5 trading days following the event, between July 15 and 19, portfolios restricted to nonzero GRS thresholds (i.e., GRS > 0, GRS > 20, and GRS > 50) display a clear downward trend. Notably, the portfolios show decreasing CARs as the GRS threshold increases. Table 2 presents regression results analyzing the impact of GRS on FF3adjusted returns following the assassination attempt. The results in Panel A indicate a pronounced negative effect of green revenues on adjusted returns after the event, with coefficients of GRS in Columns 1 through 3 being statistically highly significant. The economic impact of this effect is sizeable, as GRS' coefficient of −0.033 and a onestandard deviation increase in GRS of 20 percentage points relate to a 0.66 percentage point lower CAR relative to a median CAR [0,4] of 0.11%. In Panel B, we test the existence of a nonlinear effect of GRS on returns and find evidence of such. In Columns 4 through 6, we add GRS squared to the regressions and observe statistically significant negative coefficients. The coefficient of GRS turns in sign and shows a moderately significant value of 0.05 in Column 6. The results suggest a nonlinear effect of GRS on adjusted returns in the days following the assassination attempt. We plot the relationship between GRS and CAR [0,4] in Figure2 and find that investors most rewarded a moderate GRS level of 26% with an adjusted return of 0.46%, whereas GRS higher than 48% exhibit decreasing negative CARs. In Appendix S2, we retest this nonlinear effect using dummy variables for differing GRS levels and find supporting results. Last, we test the moderating influence of the state political environment on the effect of GRS on adjusted returns. To facilitate interpretation, we employ the interaction of the variable state political direction with the dummy variable GRS > 0. In Panel C, we utilize GRS > 0 as a single explanatory variable and observe a statistically significant negative coefficient only in Column 1, consistent with the notion of a nonlinear effect of positive GRS in the subsequent days. Next, we include state political direction in Panel D and find a statistically significant negative interaction term in Columns 4 through 6, with the magnitude and significance of the coefficient increasing over the regarded timeframe. The results indicate that firms with green revenues located in Democraticleaning states exhibit significantly lower CARs than otherwise similar firms headquartered in Republicanleaning states. Specifically, a firm with GRS > 0 located in California (state political CAR i =γ 0 +γ 1 grs i +γ 2 logmcap i +γ 3 BTM i +γ 4 ROAi +γ5revgrowthi+γ6leveragei+FE+εi 7943 TABLE 1 | Descriptive statistics. Panel A: Accounting and green revenue statistics Variable NMin P25 Mean Median P75 Max SD Market cap (USD bn) 2397 0.02 0.69 22.52 2.56 9.07 3395.33 143.50 Booktomarket ratio 2397 1.91 22.90 56.54 45.13 80.07 259.72 44.98 Leverage ratio 2397 0.00 7.60 25.10 22.85 37.96 96.50 20.04 ROA 2397 −81.39 −0.36 0.71 2.33 6.57 27.33 13.52 Revenue growth 2397 −75.33 −4.96 9.26 4.54 14.65 296.32 40.20 Tax rate 1722 −130.48 15.16 19.85 21.41 25.46 190.77 31.38 Green revenue share 2397 0.00 0.00 6.95 0.00 0.00 100.00 19.85 Green revenue share (only firms with GRS > 0) 573 0.01 5.00 29.06 16.08 41.00 100.00 31.75 Panel B: Fama–French threefactoradjusted returns Event NMin P25 Mean Median P75 Max SD I: Trump assassination attempt (Saturday, July 13, 2024) July 15, 2024 [0,0] 2397 −17.98 −1.20 −0.02 −0.03 1.18 22.90 2.59 Cumulative 3day [0,2] 2397 −27.74 −1.92 −0.03 0.29 2.32 26.44 4.62 Cumulative 5day [0,4] 2397 −34.79 −2.30 −0.26 0.11 2.48 48.89 5.45 II: Harris candidacy announcement (Sunday, July 21, 2024) July 22, 2024 [0,0] 2397 −18.67 −0.93 0.02 0.13 1.03 14.33 2.16 Cumulative 3day [0,2] 2397 −25.53 −1.79 −0.21 −0.13 1.41 22.49 3.61 Cumulative 5day [0,4] 2397 −54.41 −2.41 0.11 0.31 2.82 47.13 5.85 Cumulative 10day [0,9] 2397 −47.33 −3.74 0.53 0.99 5.24 95.84 9.13 Cumulative 15day [0,14] 2397 −82.87 −5.33 0.41 0.90 6.36 195.64 12.68 III: US presidential election (Tuesday, November 5, 2024) November 6, 2024 [0,0] 2397 −65.56 −3.73 −0.90 −0.54 2.36 37.22 5.99 Cumulative 3day [0,2] 2397 −79.14 −3.78 −0.74 −0.19 3.30 73.91 8.58 Cumulative 5day [0,4] 2397 −85.07 −5.05 −0.92 −0.41 4.03 81.00 10.19 Cumulative 10day [0,9] 2397 −85.08 −5.88 −0.90 −0.48 4.40 85.67 12.19 Cumulative 15day [0,14] 2397 −150.02 −6.04 −0.31 0.11 5.11 227.05 14.50 Panel C: State political environment State political direction States Full sample GRS > 0 NMean GRS NMean GRS 0.00 AK, AL, AR, FL, IA, ID, IN, LA, MO, MS, MT, ND, NE, OH, OK, SC, SD, TN, TX, UT, WV, WY 666 6.08 172 23.53 0.17 GA, KS, KY, NC 144 10.15 41 35.63 0.25 WI 41 4.13 11 15.38 0.33 AZ, PA 150 10.08 43 35.15 0.50 MI, NV 70 6.16 16 26.97 0.67 NH 715.05 426.35 (Continues) 7944 Business Strategy and the Environment, 2025 direction = 1) relates to approximately 1.7 percentage points lower CAR [0,4] than an identical firm headquartered in Texas (state political direction = 0). The insignificant standalone coefficient of state political direction suggests that the influence of the state environment on returns is restricted to green firms only. The controls across all analyses indicate that smaller firms and firms with lower booktomarket ratios experienced higher abnormal returns following the event.4 Whereas revenue growth shows no significant impact on returns, leverage appears to negatively relate to CAR [0,0] and ROA positively influences abnormal returns in the longer event windows. Panel C: State political environment State political direction States Full sample GRS > 0 NMean GRS NMean GRS 0.83 DC, ME, VA, VT 94 7.94 26 28.69 0.92 CO, MN 114 9.12 33 31.51 1.00 CA, CT, DE, HI, IL, MA, MD, NJ, NM, NY, OR, RI, WA 1010 6.63 207 32.36 Total —2296 7.06 553 29.31 Note: This table displays descriptive sample statistics. Panel A reports summary statistics on accounting controls and green revenue variables, Panel B reports summary statistics on Fama–French threefactoradjusted returns around the event days, and Panel C reports statistics on the state political environment. Variable definitions are as follows: Market cap is the closing market capitalization as of July 1, 2024. Booktomarket ratio is defined as book value of equity divided by market capitalization × 100. Leverage ratio is defined as book value of total debt divided by book value of total assets × 100. ROA is defined as income before extraordinary items divided by book value of total assets × 100. Revenue growth is defined as periodonperiod change in total revenue × 100. Tax rate is defined as income taxes divided by income before taxes × 100. Green revenue share (GRS) is the share of total firm revenues generated from environmentally sustainable products and services. We estimate Fama–French threefactor loadings for each event by regressing daily stock returns in excess of the riskfree rate on the respective research returns from Kenneth French's data library from t = −260 to t = −11. We derive daily Fama–French threefactoradjusted returns by subtracting expected returns from realized returns and calculate the cumulative abnormal return as the sum of daily abnormal returns over the specified window. We also estimate raw returns and CAPMadjusted returns and present the summary statistics in AppendixS1. The variable state political direction is defined as a weighted average of three components, each ranging from 0 (strongly Republican) to 1 (strongly Democratic): (i) the 2024 presidential election popular vote majority, (ii) the state government's political composition, and (iii) the majority party in the state's Congress delegation. TABLE 1 | (Continued) FIGURE 1 | Development of GRSportfolios around Trump assassination attempt and Harris candidacy announcement. This figure displays cumulative Fama–French threefactoradjusted returns of equalweighted portfolios formed by green revenue share (GRS) following the assassination attempt on Donald Trump (Saturday, July 13, 2024) and Kamala Harris' announcement to run as presidential candidate (Sunday, July 21, 2024). The portfolios include all firms in the sample (2397 firms), firms with GRS larger than 0 (573 firms), firms with GRS larger than 20 (226 firms), and firms with GRS larger than 50 (126 firms). Returns start cumulating on July 15, 2024, the first trading day after the assassination attempt. Returns start cumulating on June 28, 2024, 10 trading days before assassination attempt (i.e., t = 0). Interpretation: This figure shows a negative investor reaction to green revenues following the Trump assassination attempt, with more pronounced declines in CAR for portfolios with higher GRS. In the first trading days after the Harris' candidacy announcement, the green portfolios continued their downward trend. Starting t = 9 (July 26), the green portfolios experienced a sharp rise in CAR peaking in t = 16 (August 6), with the increase being more pronounced for greener portfolios. Subsequently, the GRS portfolios returned to preannouncement levels by t = 20 (August 12). 7945 In sum, we provide evidence that investors rapidly and extensively reacted to the shift in election odds following the Trump assassination attempt on July 13, 2024. Investors showed a nuanced relationship with green revenues, as they heavily punished companies with high GRS and they most rewarded moderate GRS levels around 26%. In addition, we show that investors incorporated firms' headquarter location into their reactions, as green companies located in Democraticleaning states exhibited significantly lower returns than firms headquartered in Republicanleaning states. TABLE 2 | Trump assassination attempt—impact of green revenues on stock returns. I: Trump assassination attempt (Saturday, July 13, 2024) Dep. var. Fama–French threefactoradjusted returns (1) (2) (3) (4) (5) (6) July 15 [0,0] 3day [0,2] 5day [0,4] July 15 [0,0] 3day [0,2] 5day [0,4] Panel A Panel B Green revenue share −0.018*** −0.035*** −0.033*** 0.017* 0.031* 0.049** (−4.03) (−5.04) (−4.18) (1.73) (1.78) (2.41) Green revenue share sq. −0.000*** −0.001*** −0.001*** (−2.85) (−3.36) (−3.60) Log market cap −0.184*** −0.457*** −0.246*** −0.199*** −0.486*** −0.282*** (−5.88) (−7.68) (−3.66) (−6.28) (−8.10) (−4.15) Booktomarket ratio −0.006*** −0.012*** −0.009*** −0.006*** −0.013*** −0.009*** (−3.95) (−4.81) (−2.71) (−4.05) (−4.93) (−2.84) Leverage ratio −0.011*** −0.010* −0.004 −0.011*** −0.010* −0.004 (−3.66) (−1.74) (−0.54) (−3.69) (−1.77) (−0.57) ROA −0.003 0.050*** 0.077*** −0.003 0.050*** 0.077*** (−0.41) (4.11) (5.15) (−0.44) (4.10) (5.16) Revenue growth 0.003 −0.002 −0.000 0.003 −0.001 −0.000 (1.16) (−0.47) (−0.13) (1.20) (−0.41) (−0.07) N2397 2397 2397 2397 2397 2397 Adj. R20.154 0.125 0.114 0.159 0.130 0.120 Industry FE Yes Yes Yes Yes Yes Yes Panel C Panel D Green revenue share > 0 −0.390*** −0.369 −0.129 −0.115 0.343 0.915** (−2.89) (−1.42) (−0.42) (−0.66) −0.96 −2.24 State political direction −0.075 0.174 0.283 (−0.56) −0.73 −0.99 Green revenue share > 0 * State political direction −0.558** −1.409*** −2.021*** (−2.05) (−2.77) (−3.39) N2397 2397 2397 2296 2296 2296 Adj. R20.142 0.107 0.102 0.142 0.114 0.107 Controls Yes Yes Yes Yes Yes Yes Industry FE Yes Yes Yes Yes Yes Yes Note: This table presents event study regression results analyzing the impact of green revenues on Fama–French threefactoradjusted returns following the assassination attempt on Donald Trump on July 13, 2024. The regressions contain fourdigit GICS industrygroup fixed effects. Robust Tstatistics are reported in parentheses. *p < 0.10, **p < 0.05, ***p < 0.01. Interpretation: This table shows that the company's green revenue share (GRS) is significantly associated with negative adjusted returns following the Trump assassination attempt. GRS exercises a nonlinear effect on CARs, as its negative impact intensifies with increasing levels of GRS. The state political environment significantly moderates the impact of GRS, as green firms headquartered in Democraticleaning states experience significantly lower CARs than comparable firms in Republican states. 7952 Business Strategy and the Environment, 2025 Climate Transition Index.9 This index extends beyond green revenues by incorporating fossil fuel and carbon emissions, climate governance activities, and carbon reduction commitments (LSEG2025). We present regression results in AppendixS7 and find that green index inclusion relates to significantly negative abnormal returns following the election, providing additional robustness to our main findings. 4.4.7 | Inclusion of Emissions and ESG Variables Our primary explanatory variable, green revenue, captures firmlevel exposure to environmentally sustainable business opportunities and is therefore particularly well suited to assess policy shifts related to funding and the outlook of green business models. Nevertheless, we recognize the relevance of more established measures such as carbon emissions and ESG ratings. These measures are commonly used in the literature and may reflect different aspects of a firm's environmental profile. To ensure robustness and comparability, we therefore include total CO2 emissions intensity (i.e., Scope 1 and 2 emissions relative to revenue10) and the environmental pillar score from LSEG as two widely adopted alternatives in our analysis. As shown in AppendixS8, our main findings on the relationship between green revenues and stock market reactions remain unchanged after the inclusion of these additional measures. 4.4.8 | Inclusion of Change in GRS To further extend our analysis, we additionally test the impact of GRS growth dynamics. Although in our main regressions we employ GRS as a static measure, we recognize that green revenue exposure can evolve over time. Therefore, we investigate whether yearoveryear changes in GRS (i.e., GRS growth),11 rather than its levels alone, are associated with abnormal returns around the election. AppendixS9 presents the key findings, showing a positive and statistically significant relationship between GRS growth and abnormal returns across all windows. In contrast, the level of GRS continues to be negatively associated with returns, consistent with our main findings. This finding indicates that, although the market may penalize firms' current green revenue exposure, it appears to reward firms with increasing GRS, possibly interpreting such changes in GRS as signals of adaptability. 4.4.9 | Inclusion of StateLevel Green Investments In our analysis on the moderating effect of the state political environment, we argue that green firms in Republicanleaning states exhibit less negative abnormal returns due to a closer political alignment with the Trump administration. However, one could reason that our findings may instead reflect differences in statelevel exposure to green industries and related funding, rather than the political environment per se. To alleviate this concern, we incorporate a measure of statelevel green investments as an additional variable. Specifically, we retrieve clean investment, that is, investment in climate technologies, by state in 2024 as a share of state GDP from Clean Investment Monitor (2025).12 In Appendix S10, we apply this measure in two ways. In Panel A, we include clean investment to GDP as an additional control variable and find that the main results remain robust to its inclusion. In Panel B, we test the interaction between GRS > 0 and clean investment to GDP and find no conclusive evidence of a significant effect. Taken together, these FIGURE 4 | Interaction between state political environment and green revenues. This figure illustrates the moderating effect of the state political environment on the relationship between the green revenue share (GRS) and 5day cumulative Fama–French threefactoradjusted returns (CAR [0,4]) following the US presidential election (Tuesday, November 5, 2024). State political direction is a continuous variable spanning from 0 (i.e., strongly Republican) to 1 (i.e., strongly Democratic). Green revenue share > 0 is a dummy variable coded one if a firm exhibits green revenues. Interpretation: This figure shows that firms with green revenues headquartered in Democraticleaning states exhibited significantly lower adjusted returns than otherwise similar firms headquartered in Republicanleaning states following the US presidential election. 7953 TABLE 5 | US presidential election—impact of green revenue tiers and sectors on stock returns. III: U.S. presidential election (Tuesday, November 5, 2024) Dep. var. Fama–French threefactoradjusted returns (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) Nov. 6 [0,0] 3day [0,2] 5day [0,4] 10day [0,9] 15day [0,14] Nov. 6 [0,0] 3day [0,2] 5day [0,4] 10day [0,9] 15day [0,14] Panel A Panel B GRS Tier 1 −0.073*** −0.093*** −0.094*** −0.083*** −0.077*** (−4.13) (−4.25) (−4.17) (−3.45) (−3.50) GRS Tier 2 −0.034** −0.052*** −0.075*** −0.067*** −0.053** (−2.48) (−2.79) (−3.16) (−2.87) (−2.19) GRS Tier 3 −0.039 −0.003 0.003 −0.068 −0.037 (−1.15) (−0.06) (0.06) (−1.41) (−0.79) GRS energy generation −0.146*** −0.154** −0.177*** −0.101 −0.110 (−2.91) (−2.33) (−2.63) (−1.43) (−1.61) GRS energy management −0.047*** −0.049*** −0.062*** −0.062** −0.057** (−4.24) (−3.24) (−3.58) (−2.35) (−2.30) GRS energy equipment −0.226*** −0.260*** −0.281*** −0.219*** −0.149*** (−4.37) (−4.06) (−4.14) (−4.01) (−2.78) GRS environ. resources 0.025 0.023 0.041* 0.015 0.039* (1.18) (1.08) (1.75) (0.64) (1.77) GRS env. supp. services −0.177* −0.368*** −0.412*** −0.530*** −0.488*** (−1.87) (−3.16) (−3.63) (−4.98) (−4.91) GRS food and agriculture −0.059 −0.027 −0.044 −0.030 −0.006 (−1.11) (−0.39) (−0.50) (−0.45) (−0.09) GRS transport equipment −0.067* −0.081 −0.058 −0.067 −0.098 (−1.79) (−1.49) (−1.11) (−0.97) (−1.35) GRS transport solutions 0.051** 0.020 0.006 0.024 0.111* (2.09) (1.00) (0.21) (0.56) (1.70) (Continues) 7954 Business Strategy and the Environment, 2025 III: U.S. presidential election (Tuesday, November 5, 2024) Dep. var. Fama–French threefactoradjusted returns (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) Nov. 6 [0,0] 3day [0,2] 5day [0,4] 10day [0,9] 15day [0,14] Nov. 6 [0,0] 3day [0,2] 5day [0,4] 10day [0,9] 15day [0,14] Panel A Panel B GRS water infra. and tech. −0.018* −0.038** −0.058*** −0.061*** −0.067*** (−1.69) (−2.37) (−3.29) (−2.72) (−2.59) GRS waste and poll. ontr. 0.011 −0.023 −0.018 −0.005 −0.029 (0.83) (−0.79) (−0.51) (−0.11) (−0.65) Log market cap −0.222*** −0.023 −0.110 −0.221 −0.198 −0.218*** −0.032 −0.127 −0.252* −0.223 (−3.19) (−0.23) (−0.93) (−1.46) (−1.05) (−3.21) (−0.33) (−1.08) (−1.67) (−1.18) Booktomarket ratio −0.013*** −0.014*** −0.025*** −0.030*** −0.036*** −0.012*** −0.014*** −0.026*** −0.030*** −0.036*** (−4.19) (−2.73) (−4.41) (−3.96) (−3.86) (−4.04) (−2.78) (−4.52) (−4.03) (−3.87) Leverage ratio −0.053*** −0.030*** −0.045*** −0.028* −0.022 −0.053*** −0.029*** −0.044*** −0.027* −0.022 (−8.06) (−2.92) (−3.69) (−1.83) (−1.37) (−8.40) (−2.86) (−3.66) (−1.78) (−1.32) ROA 0.051*** 0.066*** 0.062** 0.034 0.045 0.046*** 0.062*** 0.059** 0.033 0.043 (4.13) (3.31) (2.47) (1.09) (1.08) (3.88) (3.11) (2.32) (1.05) (1.03) Revenue growth 0.004 0.007 0.012* 0.023*** 0.016 0.004 0.007 0.013* 0.023*** 0.016 (1.32) (1.49) (1.68) (2.73) (1.31) (1.33) (1.54) (1.72) (2.72) (1.32) N2397 2397 2397 2397 2397 2397 2397 2397 2397 2397 Adj. R20.229 0.107 0.137 0.111 0.072 0.279 0.140 0.166 0.128 0.080 Industry FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Note: This table presents event study regression results analyzing the impact of green revenues on Fama–French threefactoradjusted returns following the election of Donald Trump as US president on November 5, 2024. The regressions contain fourdigit GICS industrygroup fixed effects. Robust Tstatistics are reported in parentheses. *p < 0.10, **p < 0.05, ***p < 0.01. Interpretation: This table shows that Tier 1 and Tier 2 green revenue shares (GRS) are associated with negative adjusted returns following the election of Donald Trump as US president and that the magnitude of impact is significantly greater for Tier 1 GRS compared to Tier 2. In addition, GRS show pronounced sectoral differences and exhibit the most substantial effect on returns in activities related to energy equipment and generation as well as environmental support services. TABLE 5 | (Continued) 7955 analyses support the argument that statelevel differences in returns are driven by the political environment and not green investment exposure. 4.4.10 | Inclusion of Political Donations The 2024 election was characterized by publicly visible political endorsements and donations by prominent business leaders, possibly influencing investor reaction and stock returns. In line with this, Babenko etal. (2020) show that CEO political contributions can significantly affect stock performance around federal elections. To account for this potential confounding factor, we follow the approach of Babenko etal.(2020) and gather CEOlevel political donation data from the Federal Election Commission. Specifically, we create two binary indicators coded one if a CEO donated to Republican or Democratic campaigns during the 2023–24 election cycle, respectively.13 Our analysis shown in AppendixS11 reveals that Republican CEO donations are associated with positive abnormal returns, whereas Democratic CEO donations relate to negative abnormal returns. Importantly, the effect of GRS on stock returns remains unchanged when controlling for these political affiliations. 5 | Conclusion This study investigates the market reaction to political developments surrounding Donald Trump's 2024 presidential election victory, examining the impact of green revenues on stock price performance. Our findings demonstrate that US firms with higher GRS experience significantly negative cumulative abnormal returns following Trump's return to office, reflecting pronounced investor concerns about the prospects of environmentally sustainable business models that were not priced in by the market beforehand. We document a nonlinear relationship between GRS and CARs that underscores the disproportionately larger impact on firms with higher green revenue exposure. In addition, we demonstrate that investors differentiate the outlook of green firms based on the political environment of their headquarter location, with those in Democraticleaning states experiencing significantly larger negative returns than their counterparts in Republicanleaning states. Lastly, the analysis of two unanticipated preelection events, that is, the Trump assassination attempt and Kamala Harris' candidacy announcement, reveals that shifts in the perceived likelihood of Trump's presidency were promptly priced in by investors. Our work makes several important contributions to the literature. To begin with, it introduces the GRS as a novel measure of firms' financial exposure to environmentally sustainable business activities, providing a valuedriven view to assess market responses. Second, it analyzes the 2024 US presidential election as a decisive policy event, including critical leadup events, and thus offers a comprehensive perspective on how political developments with varying degrees of prior anticipation provoke strong market reactions. Finally, this study documents the role of political polarization, revealing that investor reactions to green revenues are influenced by whether firms are headquartered in Democraticor Republicanleaning states and thus politically aligned with the election winner. The implications of our findings are multifaceted. They underscore the heightened policy risk faced by environmentally sustainable businesses and show that investors account for local political dynamics and the risk of political retribution when assessing green firms' financial prospects. For policymakers, our results emphasize the importance of regulatory stability for fostering sustainable business models over the long term. Meanwhile, corporate leaders must navigate investor sensitivity to regulatory shifts and the alignment of their business model and state environment with the party in power. In sum, this study provides new evidence on how political developments shape investor perceptions of green business models, revealing their heightened vulnerability to policy shifts amid political polarization. Acknowledgements Open Access funding enabled and organized by Projekt DEAL. Endnotes 1 Executive orders dated January 20, 2025: “Putting America First in International Environmental Agreements”, “Initial Rescissions of Harmful Executive Orders and Actions,” “Declaring a National Energy Emergency,” and “Temporary Withdrawal of All Areas on the Outer Continental Shelf from Offshore Wind Leasing and Review of the Federal Government's Leasing and Permitting Practices for Wind Projects.” 2 The green revenue metric provided by LSEG denotes total revenues generated from environmentally sustainable products and services. It is based on reported and estimated figures on green revenues within a classification system of 10 green sectors as well as 64 subsectors (LSEG2024a). 3 The 10 green sectors are energy generation, energy management and efficiency, energy equipment, environmental resources, environmental support services, food and agriculture, transport equipment, transport solutions, water infrastructure and technology, and waste and pollution control. 4 The negative coefficient of the booktomarket ratio seems unexpected, as value firms (i.e., those with a high booktomarket ratio) were anticipated to gain from a Trump administration. However, ttests indicate that value firms experience greater abnormal returns compared to growth firms. This outcome implies that other factors, such as firm size or additional covariates, may play a role in shaping the link between valuation and returns. 5 Environmental support services comprise Tier 2 activities related to environmental consulting, green finance and investment, and smart city design and engineering. 6 Energy equipment comprises activities related to the development, processing, production, and distribution of equipment for renewable and alternative energy generation. 7 Energy generation comprises activities related to the generation of energy from renewable and alternative sources. 8 Energy management comprises activities related to products and services designed to improve the efficiency of energy use and management (e.g., power storage, smart grids, and resourceefficient buildings). 9 Five hundred fiftysix out of 2397 sample firms are included in this index, with index inclusion and green revenue share > 0 exhibiting a moderately positive correlation of 0.18. 10 We winsorize the revenuescaled Scope 1 and 2 emission intensity at the 2.5th and 97.5th percentiles. 7956 Business Strategy and the Environment, 2025 11 The mean (median) value of GRS growth is 0.05 (0.00). 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