The Politics of Climate Change and Materiality in Accounting Disclosures: Evidence from Juror Judgments

50 Pages Posted: 17 Aug 2022

See all articles by Michael T. Durney

Michael T. Durney

University of Iowa

Joseph A. Johnson

University of Central Florida

Rick C. Warne

University of Cincinnati - Department of Accounting

Date Written: August 10, 2022

Abstract

This paper examines the impact of two recent controversial developments related to the Securities and Exchange Commission (SEC). First, the SEC recently proposed new, politically charged climate-related disclosures with a bright-line materiality threshold for all registrants. The proposed rules are expected to increase climate-related litigation against registrants. Second, a recent U.S. Court of Appeals ruling will likely cause significant changes to the SEC enforcement process and result in more jury trials, including trials related to climate disclosure. In an experiment, we predict and find that even though jurors are expected to set aside their personal views when issuing verdicts, their political views on climate change significantly influence their verdicts and materiality judgments. Further, we find that rather than mitigating the influence of their political views, the presence of a bright-line materiality threshold actually exacerbates this influence. We discuss the practical and regulatory implications of these results.

Keywords: SEC, climate disclosure, materiality, bright-line, juror judgments, protected values

JEL Classification: M40, M41, M48, Q54, Q56

Suggested Citation

Durney, Michael Thomas and Johnson, Joseph A. and Warne, Rick C., The Politics of Climate Change and Materiality in Accounting Disclosures: Evidence from Juror Judgments (August 10, 2022). Available at SSRN: https://ssrn.com/abstract=4180995 or http://dx.doi.org/10.2139/ssrn.4180995

Michael Thomas Durney

University of Iowa ( email )

341 Schaeffer Hall
Iowa City, IA 52242-1097
United States

Joseph A. Johnson (Contact Author)

University of Central Florida ( email )

12744 Pegasus Dr.
Orlando, FL 32816
United States

Rick C. Warne

University of Cincinnati - Department of Accounting ( email )

Cincinnati, OH 45221-0211
United States

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