Responding to Climate Change Crises: Firms’ Tradeoffs

68 Pages Posted: 2 Aug 2023

See all articles by Felix Fritsch

Felix Fritsch

University of Mannheim

Qi Zhang

The Chinese University of Hong Kong (CUHK) - CUHK Business School

Xiang Zheng

Norwegian School of Economics (NHH)

Date Written: July 31, 2023

Abstract

In this paper, we examine the trade-offs firms make in their voluntary disclosure decisions following negative media coverage of climate change incidents. We combine a keyword discovery algorithm and a fine-tuned BERT model to identify “hard” and “soft” climate disclosures on Twitter. We find that firms on average tend to issue climate tweets as a rapid response to negative climate incidents. In addition, firms with a history of hard climate change disclosure, as measured by ESG reports, are more likely to issue climate-related responses than those without such a history of disclosure. Furthermore, we show that prior hard disclosure is associated with hard responses when the incident receives moderate media attention, but with soft responses when the incident receives low or high media attention. Our findings are consistent with the dynamic disclosure theory that early disclosure generates a real option for firms to flexibly respond to negative media coverage.

Keywords: Climate change, cost-benefit tradeoffs, soft information, social media, voluntary disclosure

JEL Classification: D61, M14, M40, Q54

Suggested Citation

Fritsch, Felix and Zhang, Qi and Zheng, Xiang, Responding to Climate Change Crises: Firms’ Tradeoffs (July 31, 2023). Available at SSRN: https://ssrn.com/abstract=4527255 or http://dx.doi.org/10.2139/ssrn.4527255

Felix Fritsch

University of Mannheim ( email )

Schloss
Mannheim, BW 68131
Germany

Qi Zhang

The Chinese University of Hong Kong (CUHK) - CUHK Business School ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Shatin, N.T.
Hong Kong

Xiang Zheng (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway

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