Your Emissions or Mine? Examining How Emissions Management Strategies, CSR Performance, and Targets Attract Equity Capital

44 Pages Posted: 20 Apr 2020

See all articles by Joseph A. Johnson

Joseph A. Johnson

University of South Carolina - Department of Accounting

Jochen Theis

University of Southern Denmark

Adam Vitalis

University of Waterloo - School of Accounting and Finance

Donald Young

Indiana University - Kelley School of Business

Date Written: March 27, 2020

Abstract

Firms’ efforts to mitigate greenhouse gas emissions and curb climate change has recently become a significant area of concern to investors. We examine how management’s focus on mitigating its direct versus indirect emissions influences a firm’s ability to attract capital from investors, and how this ability is moderated by the firm’s corporate social responsibility (CSR) performance and adoption of an external emissions target. Using an experiment, we predict and find that investors perceive a firm with a relatively poor CSR performance record as more socially responsible, and therefore as a more attractive investment, when the firm focuses on mitigating direct versus indirect emissions. However, investors seem less concerned about the type of emissions firms mitigate when the firm has a relatively good CSR performance record. We also find that, regardless of CSR performance, adopting an external emissions target diminishes investment attractiveness when the firm focuses on mitigating indirect emissions, but not when the firm focuses on mitigating direct emissions. We discuss implications for theory and practice.

Keywords: Corporate social responsibility, emissions management strategies, firm value, industry targets

Suggested Citation

Johnson, Joseph A. and Theis, Jochen and Vitalis, Adam and Young, Donald, Your Emissions or Mine? Examining How Emissions Management Strategies, CSR Performance, and Targets Attract Equity Capital (March 27, 2020). Kelley School of Business Research Paper No. 2020-67, Available at SSRN: https://ssrn.com/abstract=3562196 or http://dx.doi.org/10.2139/ssrn.3562196

Joseph A. Johnson

University of South Carolina - Department of Accounting ( email )

The Francis M. Hipp Building
1705 College Street
Columbia, SC 29208
United States

Jochen Theis (Contact Author)

University of Southern Denmark

Universitetsparken 1
DK-6000 Kolding, 6000
Denmark

Adam Vitalis

University of Waterloo - School of Accounting and Finance ( email )

University of Waterloo
200 University Avenue West
Waterloo, Ontario N2L 3G1 N2L 3G1
Canada
2263382264 (Phone)

Donald Young

Indiana University - Kelley School of Business ( email )

1309 East Tenth Street
Indianapolis, IN 47405-1701
United States

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