The Relevance to Investors of Greenhouse Gas Emission Disclosures
60 Pages Posted: 6 Jan 2011 Last revised: 21 Jun 2012
Date Written: June 20, 2012
Abstract
This study documents that investors care about companies’ greenhouse gas (GHG) emission disclosures. Three kinds of evidence support this finding. First, using companies that disclose GHG emissions voluntarily through the Carbon Disclosure Project (CDP), we show that investors act as if they use GHG emission information to assess company value. Second, our evidence finds that investors view estimates of non-disclosed GHG emission amounts as value relevant, suggesting that stock prices reflect GHG information from channels other than CDP disclosure. Third, we conduct an event study and observe a significant stock market response when companies disclose climate change information in an 8-K filing. Our results strengthen for GHG-intensive industries such as utilities, energy, and materials companies, whose valuation effects are more negative. Economically, our results suggest that for every ton of GHG emitted by the median company in our sample at an assumed cost of $20 per ton, the stock market recognizes about 20-50 percent of that amount as an off-balance sheet liability.
Keywords: Greenhouse gas emissions, investor relevance, Canadian and U.S. disclosure regulations, event study.
JEL Classification: G14, M41, M45, K22, Q20.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
By Yue Li, Peter Clarkson, ...
-
By Yue Li, Peter Clarkson, ...
-
Does it Really Pay to Be Green? Determinants and Consequences of Proactive Environmental Strategies
By Peter Clarkson, Yue Li, ...
-
Does it Really Pay to be Green? Determinants and Consequences of Proactive Environmental Strategies
By Peter Clarkson, Yue Li, ...
-
By Ans Kolk, David L. Levy, ...
-
By Peter Clarkson, Xiaohua Fang, ...
-
Carbon Emissions and Firm Value
By Ella Mae Matsumura, Rachna Prakash, ...