Climate Change and Firm Valuation: Evidence from a Quasi-Natural Experiment
59 Pages Posted: 17 Feb 2015 Last revised: 28 Oct 2015
Philipp Krueger
University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute; European Corporate Governance Institute (ECGI); University of Geneva - Geneva School of Economics and Management
Date Written: February 15, 2015
Abstract
In this paper, I estimate the effect of mandatory greenhouse gas (GHG) emissions disclosure on corporate value. Using the introduction of mandatory GHG emissions reporting for firms listed on the Main Market of the London Stock Exchange as a source of exogenous variation, I find that firms most heavily affected by the regulation experience significantly positive valuation effects. Increases in value are strongest for large firms and for firms from carbon intensive industries (e.g., oil and gas). Valuation increases are driven by capital market effects such as higher liquidity and lower bid -- ask spreads for the most affected firms.
Keywords: Mandatory disclosure regulation, greenhouse gas emissions, climate change, valuation, difference-in-differences, value
JEL Classification: D22, G18, G28, G38, K22, K32, L51, M48, Q52, Q54
Suggested Citation: Suggested Citation
Philipp Krueger (Contact Author)
University of Geneva - Geneva Finance Research Institute (GFRI) ( email )
40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland
European Corporate Governance Institute (ECGI) ( email )
c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium
University of Geneva - Geneva School of Economics and Management ( email )
Uni Mail
Bd du Pont-d'Arve 40
Geneva, 1211
Switzerland
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