Climate Change and Asset Prices: Are Corporate Carbon Disclosure and Performance Priced Appropriately?

28 Pages Posted: 27 May 2020

See all articles by Andrea Liesen

Andrea Liesen

Institute for Ecological Economy Research (IOEW)

Frank Figge

KEDGE Business School

Andreas Hoepner

affiliation not provided to SSRN

Dennis M. Patten

Illinois State University

Multiple version iconThere are 2 versions of this paper

Date Written: January/February 2017

Abstract

This paper empirically assesses the relevance of information on corporate climate change disclosure and performance to asset prices, and discusses whether this information is priced appropriately. Findings indicate that corporate disclosures of quantitative greenhouse gas (GHG) emissions and, to a lesser extent, carbon performance are value relevant. We use hand‐collected information on quantitative GHG emissions for 433 European companies and build portfolios based on GHG disclosure and performance. We regress portfolios on a standard four factor model extended for industry effects over the years 2005 to 2009. Results show that investors achieved abnormal risk‐adjusted returns of up to 13.05% annually by exploiting inefficiently priced positive effects of (complete) GHG emissions disclosure and good corporate climate change performance in terms of GHG efficiency. Results imply that, firstly, information costs involved in carbon disclosure and management do not present a burden on corporate financial resources. Secondly, investors should not neglect carbon disclosure and performance when making investment decisions. Thirdly, during the period analysed, financial markets were inefficient in pricing publicly available information on carbon disclosure and performance. Mandatory and standardised information on carbon performance would consequently not only increase market efficiency but result in better allocation of capital within the real economy.

Keywords: carbon disclosure, climate change, value relevance, disclosure quality, GHG emissions, market efficiency, stock performance

Suggested Citation

Liesen, Andrea and Figge, Frank and Hoepner, Andreas and Patten, Dennis M., Climate Change and Asset Prices: Are Corporate Carbon Disclosure and Performance Priced Appropriately? (January/February 2017). Journal of Business Finance & Accounting, Vol. 44, Issue 1-2, pp. 35-62, 2017, Available at SSRN: https://ssrn.com/abstract=3604456 or http://dx.doi.org/10.1111/jbfa.12217

Andrea Liesen (Contact Author)

Institute for Ecological Economy Research (IOEW) ( email )

Potsdamer Str. 105
Berlin, 10785
Germany

Frank Figge

KEDGE Business School ( email )

Domaine de Luminy - BP 921
BP 921
Marseille, PACA 13288
France

Andreas Hoepner

affiliation not provided to SSRN

No Address Available

Dennis M. Patten

Illinois State University ( email )

Department of Accounting
Normal, IL USA 61761
309-438-7857 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
2
Abstract Views
506
PlumX Metrics