Market responses to firms’ voluntary carbon disclosure: Empirical evidence from the United Kingdom

Abstract

In corporate boardrooms around the world, climate change has quickly risen to become a major issue, matching public concern. Recently, corporate management has encountered stakeholder pressure to disclose more information about their carbon profile and their plans to improve it.They have also been challenged to find the appropriate strategy for carbon disclosures, requiring an understanding of the costs and benefits of both carbon improvement initiatives and the reporting of them.Using a unique data set that contains firms listed on the FTSE 350 index on the London Stock Exchange market from 2009 to 2015, we apply the event study method to examine market reaction to carbon disclosures. The results show that investors respond significantly negatively to carbon disclosure announcements via Carbon Disclosure Project (CDP) of FTSE 350 firms.Moreover, for firms working in carbon-intensive industries, investors react to carbon disclosure announcements in a more significantly negative way compared with the main sample. We also find that the study's main findings are driven by the smaller FTSE 350 firms. Furthermore, a subsample of observations for the financial crisis period of 2007-2008 was analyzed to explore the examined relationship during the crisis. In contrast, a significant positive market reaction to carbon disclosure was found for the 2007-2008 crisis period. Our study's findings offer fresh insight and updated policy implications for investors, management and sustainability institutions. We recommend management accompanies their carbon disclosures with more explicit statements of reasons for carbon initiatives and the benefits arising from them.

Voluntary Disclosure of Carbon Emissions and Sustainable Existence of Firms: With a Focus on Human Resources of Internal Control System

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The Financial Implications of the Coronavirus COVID-19 Pandemic: A Review

“…Stock market quotes are affected by both current speculative factors and fundamental factors, including those that are difficult to predict. The impact on the stock markets from political events was studied by Bash and Alsaifi (2019) and Shanaev and Ghimire (2019), from natural disasters, for example, by Kowalewski and Śpiewanowski (2020), from environmental disasters, for example, by Alsaifi et al (2020) and Guo et al (2020).…”

The Impact of Environmental Information Disclosure Quality on Loan Scale for Enterprises in China’s Heavy Polluting Industries

“…Considering that information disclosure is a way for companies to communicate with external parties, different information disclosure quality may lead to different consequences. Previous literature confirms that the quality of disclosure does have an impact on some aspects of the company, such as company reputation and market returns [1,2]. However, few authors have studied the impact of environmental information disclosure on the scale of bank financing.…”