The Information Content of Managers’ Climate Risk Disclosure: Evidence from Conference Calls

65 Pages Posted: 29 Apr 2022 Last revised: 28 Oct 2024

See all articles by Brian Bratten

Brian Bratten

University of Kentucky - Von Allmen School of Accountancy

Sung-Yuan (Mark) Cheng

University of Kentucky

Date Written: October 12, 2024

Abstract

We explore the determinants of voluntary disclosures about climate risks made by managers during earnings conference calls, and examine whether these disclosures provide decision-useful information to investors. Using a sample of more than 70,000 conference-call transcripts from 2005-2020 with over 6,000 disclosures related to climate risk events, we find that disclosure is more common for smaller firms with higher but more volatile performance. We also show that firms often bundle climate risk disclosures with bad news about earnings in conference calls that are longer and have a more negative tone. Controlling for earnings news and firm fixed effects, we find a negative stock price reaction to climate risk disclosures in conference calls, but we also find that these disclosures are positively associated with abnormal trading volume, suggesting investors have different beliefs about how to incorporate them. Finally, we find that the negative stock price reaction to bad news about earnings is less pronounced when managers provide climate risk disclosures. Overall, our results provide evidence on when managers make climate risk disclosures in conference calls and how
investors react, and are consistent with regulators’ proposals for more specific guidance on the form and content of such disclosures.

Keywords: climate change, risk disclosure, ESG, sustainability disclosure, market reactions, greenwashing

JEL Classification: G11, G14, Q54

Suggested Citation

Bratten, Brian and Cheng, Sung-Yuan (Mark), The Information Content of Managers’ Climate Risk Disclosure: Evidence from Conference Calls (October 12, 2024). Available at SSRN: https://ssrn.com/abstract=4068992 or http://dx.doi.org/10.2139/ssrn.4068992

Brian Bratten (Contact Author)

University of Kentucky - Von Allmen School of Accountancy ( email )

Lexington, KY 40506
United States
859-257-1947 (Phone)

HOME PAGE: http://gatton.uky.edu/faculty-research/departments/von-allmen-school-accountancy/directory

Sung-Yuan (Mark) Cheng

University of Kentucky ( email )

Lexington, KY 40506
United States

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