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Climate Change and Asset Prices: Are Corporate Carbon Disclosure and Performance Priced Appropriately?
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE).
2017 (English)In: Journal of Business Finance & Accounting, ISSN 0306-686X, E-ISSN 1468-5957, Vol. 44, no 1-2, 35-62 p.Article in journal (Refereed) Published
Abstract [en]

This paper empirically assesses the relevance of information on corporate climate change disclosure and performance to asset prices, and discusses whether this information is priced appropriately. Findings indicate that corporate disclosures of quantitative greenhouse gas (GHG) emissions and, to a lesser extent, carbon performance are value relevant. We use hand-collected information on quantitative GHG emissions for 433 European companies and build portfolios based on GHG disclosure and performance. We regress portfolios on a standard four factor model extended for industry effects over the years 2005 to 2009. Results show that investors achieved abnormal risk-adjusted returns of up to 13.05% annually by exploiting inefficiently priced positive effects of (complete) GHG emissions disclosure and good corporate climate change performance in terms of GHG efficiency. Results imply that, firstly, information costs involved in carbon disclosure and management do not present a burden on corporate financial resources. Secondly, investors should not neglect carbon disclosure and performance when making investment decisions. Thirdly, during the period analysed, financial markets were inefficient in pricing publicly available information on carbon disclosure and performance. Mandatory and standardised information on carbon performance would consequently not only increase market efficiency but result in better allocation of capital within the real economy.

Place, publisher, year, edition, pages
WILEY , 2017. Vol. 44, no 1-2, 35-62 p.
Keyword [en]
carbon disclosure, climate change, value relevance, disclosure quality, GHG emis-sions, market efficiency, stock performance
National Category
Business Administration
Identifiers
URN: urn:nbn:se:umu:diva-133478DOI: 10.1111/jbfa.12217ISI: 000395632800002OAI: oai:DiVA.org:umu-133478DiVA: diva2:1088146
Available from: 2017-04-11 Created: 2017-04-11 Last updated: 2017-04-11Bibliographically approved

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Liesen, Andrea
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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf