The Information Content of Managers’ Climate Risk Disclosure

55 Pages Posted: 29 Apr 2022

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: March 28, 2022

Abstract

We examine whether voluntary disclosures about climate risks 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 a negative stock price reaction to climate risk disclosures. However, these climate risk disclosures are positively associated with abnormal trading volume, suggesting investors have different beliefs about how to incorporate them. We also find evidence that managers often bundle climate risk disclosures together with bad news about earnings, and that investors respond less negatively to bad news in these cases. In additional analyses we find investor reactions are more pronounced after the Paris Agreement and when climate risks are more salient. Overall, our results provide evidence on whether and when climate risk disclosures are important to investors 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 (March 28, 2022). 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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