Does Market Demand for Climate-Related Disclosure Regulation?

31 Pages Posted: 22 Nov 2022

See all articles by Richard M. Frankel

Richard M. Frankel

Washington University in Saint Louis - Olin Business School

Yongzhao (Vincent) Lin

Washington University in St. Louis - John M. Olin Business School

Xiumin Martin

Washington University in Saint Louis - Olin School of Business

Date Written: November 16, 2022

Abstract

We study the market reaction to events leading up to and including the release of the SEC’s Proposed Mandatory Climate Risk Disclosures in firms’ financial statements. Our goal is to evaluate whether investors benefit from this proposal. We find the market, on average, does not react to these events significantly in a short window. In the cross-section, we find a significant negative market reaction for non-CO2-reporting firms and muted reaction for CO2-reporting firms. Within CO2-reporting firms, we find no measurable difference between those with assurance and those without. We conclude there is little evidence for climate-related disclosure demand. Results also suggest significant variation in costs and benefits across firms. Thus, one overarching disclosure requirement is likely inefficient.

Keywords: ESG; Regulation

JEL Classification: G14, G21, G24, G28

Suggested Citation

Frankel, Richard M. and Lin, Yongzhao (Vincent) and Martin, Xiumin, Does Market Demand for Climate-Related Disclosure Regulation? (November 16, 2022). Available at SSRN: https://ssrn.com/abstract=4278875 or http://dx.doi.org/10.2139/ssrn.4278875

Richard M. Frankel

Washington University in Saint Louis - Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Yongzhao (Vincent) Lin (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Xiumin Martin

Washington University in Saint Louis - Olin School of Business ( email )

Saint Louis, MO 63130
United States

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