Environmental Disclosure and the Cost of Capital: Evidence from the Fukushima Nuclear Disaster

European Accounting Review (forthcoming)

77 Pages Posted: 2 Jan 2014 Last revised: 13 Apr 2023

See all articles by Pietro Bonetti

Pietro Bonetti

University of Navarra, IESE Business School

Charles H. Cho

ESSEC Business School; York University - Schulich School of Business

Giovanna Michelon

University of Bristol; University of Padova

Date Written: November 1, 2015

Abstract

We examine the relation between environmental disclosure and the cost of capital by exploiting the Fukushima nuclear disaster as a source of variation in the relevance of environmental information for investors. Using a large hand-collected sample of Japanese firms, we find that firms disclosing carbon emissions experience a lower increase in the cost of capital than non-disclosing firms. Cross-sectional analyses suggest that the association between disclosure and the cost of capital is driven by the increase in investor uncertainty about the energy supply shortage that followed the disaster rather than future regulatory costs. Moreover, we find that after the disaster, non-disclosing firms in the pre-disaster period increase their environmental disclosures to a greater extent relative to disclosing firms. Taken together, our results provide insight into the link between non-financial, unregulated disclosures and the cost of capital.

Keywords: Environmental disclosure; Cost of capital; Disclosure reaction; Carbon emissions.

JEL Classification: G01, G12, G14, G30, M40, M41

Suggested Citation

Bonetti, Pietro and Cho, Charles H. and Michelon, Giovanna, Environmental Disclosure and the Cost of Capital: Evidence from the Fukushima Nuclear Disaster (November 1, 2015). European Accounting Review (forthcoming), Available at SSRN: https://ssrn.com/abstract=2373877 or http://dx.doi.org/10.2139/ssrn.2373877

Pietro Bonetti

University of Navarra, IESE Business School ( email )

Avenida Pearson 21
Barcelona, 08034
Spain

Charles H. Cho

ESSEC Business School ( email )

3 Avenue Bernard Hirsch
CS 50105 CERGY
CERGY, CERGY PONTOISE CEDEX 95021
France

HOME PAGE: http://www.essec.edu/faculty/cho-charles

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

HOME PAGE: http://schulich.yorku.ca/faculty/charles-cho

Giovanna Michelon (Contact Author)

University of Bristol ( email )

University of Bristol,
Senate House, Tyndall Avenue
Bristol, Avon BS8 ITH
United Kingdom
BS8 1PQ (Fax)

University of Padova ( email )

Via del Santo 33
Padova, PD 35123
Italy
+390498273773 (Phone)
+390498274211 (Fax)

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