The effect of the inflation reduction act on the European financial market

Abstract

This thesis analyzes the impact of the US Inflation Reduction Act (IRA) of 2022 on the European financial markets. The study employs an event study methodology to examine the abnormal returns of companies listed on the Euro Stoxx 600 index around key legislative events related to the IRA. The findings reveal significant variations in market reactions across different sectors, with the energy and healthcare sectors showing contrasting responses. The study highlights that firms with higher greenhouse gas emissions experienced significant negative abnormal returns, indicating increased investor concerns about regulatory costs. Additionally, the research explores the role of foreign sales. It demonstrates that companies with significant international exposure exhibited different abnormal returns depending on the phase of the legislative process. This thesis contributes to the climate finance literature by providing empirical evidence on how US climate policies can have significant effects on foreign markets, highlighting the importance of sector-specific and firm-specific factors.

Date of Award	18 Oct 2024
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	José D. Garcia Revelo (Supervisor)