Going Green: Market Reaction to CSR Newswire Releases

Abstract

Voluntary disclosure theory predicts that an optimal disclosure decision should produce an overall net benefit for shareholders, and that such net benefit should decrease in public information availability. This study supports the predictions of voluntary disclosure theory in the context of climate change. Using voluntary disclosures made through the CSRwire news service, we find that managers’ disclosure decisions involving greenhouse gas emissions produce positive returns to shareholders. This response varies negatively with company size and public information availability. For small companies in a limited public information environment, we find that mean market-adjusted share price increases significantly by 2.32% over days −2 to 2 around the CSR newswire release date. Our sample of disclosing companies received an aggregate market value boost from their CSR news releases of approximately ten billion dollars, independent of differences in public information availability.

Keywords: Climate change voluntary disclosure, CSR newswire service, greenhouse gas emission information, event study, Fama-French model

JEL Classification: G14, M41, M45, K22, Q20