Firm-Value Effects of Carbon Emissions and Carbon Disclosures

ABSTRACT Using hand-collected carbon emissions data for 2006 to 2008 that were voluntarily disclosed to the Carbon Disclosure Project by S&P 500 firms, we examine the effects on firm value of carbon emissions and of the act of voluntarily disclosing carbon emissions. Correcting for self-selection bias from managers' decisions to disclose carbon emissions, we find that, on average, for every additional thousand metric tons of carbon emissions, firm value decreases by $212,000, where the median emissions for the disclosing firms in our sample are 1.07 million metric tons. We also examine the firm-value effects of managers' decisions to disclose carbon emissions. We find that the median value of firms that disclose their carbon emissions is about $2.3 billion higher than that of comparable non-disclosing firms. Our results indicate that the markets penalize all firms for their carbon emissions, but a further penalty is imposed on firms that do not disclose emissions information. The results are consistent with the argument that capital markets impound both carbon emissions and the act of voluntary disclosure of this information in firm valuations. JEL Classifications: G14, Q51, M14. Data Availability: Data are available from the sources identified in the study.

Download Full-text

Firm-Value Effects of Carbon Emissions and Carbon Disclosures—Evidence from Korea

International Journal of Environmental Research and Public Health ◽

10.3390/ijerph182212166 ◽

2021 ◽

Vol 18 (22) ◽

pp. 12166

Author(s):

Jeong-Hwan Lee ◽

Jin-Hyung Cho

Keyword(s):

Environmental Policy ◽

Carbon Emissions ◽

Environmental Performance ◽

Voluntary Disclosure ◽

Firm Value ◽

Positive Relationship ◽

Traditional View ◽

Firm Characteristics ◽

Specific Data ◽

Historical Developments

We examine the association between carbon emissions, carbon disclosures, and firm value for Korean firms, with a particular interest in chaebols, a special type of Korean conglomerate. Using hand-collected carbon emissions and firm-specific data for 841 Korean firms, including 514 chaebols and 335 non-chaebols, we find a significantly positive relationship between carbon emissions and firm value among chaebol affiliates. This result contrasts with previous findings conducted in advanced markets, where investors consider carbon emissions to be destructive. In terms of the voluntary disclosure policy, we find that companies with good environmental performance tend to disclose carbon emissions voluntarily. We further argue that these findings originate from the specific business atmosphere in Korea. Our results support the traditional view of corporations in terms of environmental policy and highlight the importance of firm characteristics and historical developments in the analysis of environmental policy.

Download Full-text

Voluntary hedging disclosure and corporate governance

Review of Accounting and Finance ◽

10.1108/raf-01-2018-0001 ◽

2019 ◽

Vol 19 (1) ◽

pp. 5-29

Author(s):

Seth A. Hoelscher

Keyword(s):

Corporate Governance ◽

Selection Bias ◽

Voluntary Disclosure ◽

Oil And Gas ◽

Content Type ◽

Self Selection ◽

Step Model ◽

Position Data ◽

Public Disclosures ◽

Oil And Gas Firms

Purpose This paper aims to investigate the implications of governance quality on a firm’s information environment in the context of voluntary changes in hedging disclosures made by oil and gas companies. Design/methodology/approach The research utilizes a Factiva-guided search to hand-collect public disclosures related to changes in hedging policies along with the hand collection of financial derivatives positions and operational hedging contracts data using 10-K filings. The paper addresses self-selection bias, which typically plagues voluntary disclosure studies, by implementing a Heckman (1979) two-step model to estimate the decision process, make changes in their hedge program and, conditional on making changes to their hedging activities, provide disclosure. Findings Oil and gas firms with relatively poor governance are more likely to voluntarily disclose hedging changes and do so more frequently (substitution hypothesis). There is evidence that poorly governed firms in the presence of large shareholders (i.e. high institutional ownership) are more likely to provide transparency of hedging policy changes. Originality/value This is the first study to combine hand-collected changes in hedging voluntary disclosures and hand-collected derivative position data to investigate the interaction of corporate governance and voluntary disclosure. The sample allows for analysis between three sub-samples: companies that do not make changes in hedging and do not hedge, firms that make changes in their hedging policies but do not disclose the changes during a given year and companies that change their hedging activities and provide voluntary disclosure. This unique setting helps to alleviate concerns of self-selection bias associated with voluntary disclosure.

Download Full-text

Leveling the Playing Field: The Selection and Motivation Effects of Tournament Prize Spread Information

The Accounting Review ◽

10.2308/accr-51955 ◽

2017 ◽

Vol 93 (4) ◽

pp. 127-149 ◽

Cited By ~ 4

Author(s):

Eddy Cardinaels ◽

Clara Xiaoling Chen ◽

Huaxiang Yin

Keyword(s):

Experimental Data ◽

Selection Effect ◽

Data Availability ◽

High Ability ◽

Playing Field ◽

Self Selection ◽

Employee Effort ◽

Motivation Effect ◽

Jel Classifications ◽

Low Ability

ABSTRACT Many companies administer wage policies based on tournaments or have different salaries attached to various promotion-based ranks within the company. Employees, however, do not always receive information about pay-level differences at higher ranks prior to joining the company. While some companies openly disclose prize spread information across these ranks, others keep such information secret. In this paper, we experimentally investigate whether the availability of tournament prize spread information enhances employee effort through both a selection effect and a motivation effect. We predict and find that when employees can select into tournaments of varying prize spreads (which proxies for an environment where prize spread information is available), high-ability employees are more likely than low-ability employees to select into the tournament with a larger prize spread. Thus, the availability of prize spread information produces a separation of employees based on ability. We also find that employees exert more effort when they can select into a tournament than when they are randomly assigned to one (which proxies for an environment where prize spread information is absent). We show that this result is driven by greater homogeneity in the ability of tournament contestants when the availability of tournament prize spread information provides self-selection opportunity. JEL Classifications: C91; D83; M40. Data Availability: Experimental data are available from the authors on request.

Download Full-text

Auditors and Disclosure Quality: The Case of Major Customer Disclosures

Auditing A Journal of Practice & Theory ◽

10.2308/ajpt-51835 ◽

2017 ◽

Vol 37 (3) ◽

pp. 163-189 ◽

Cited By ~ 4

Author(s):

Joseph Legoria ◽

Kenneth J. Reichelt ◽

Jared S. Soileau

Keyword(s):

Voluntary Disclosure ◽

National Level ◽

Data Availability ◽

Disclosure Quality ◽

Specialized Knowledge ◽

Auditor Quality ◽

Second Tier ◽

Office Size ◽

The Relationship ◽

Jel Classifications

SUMMARY Little is known about the relationship between disclosure quality and auditor quality. We measure disclosure quality as the likelihood of a firm fully disclosing the identity of their major customers in the Form 10-K filing. We also measure voluntary disclosure by exempt smaller reporting companies (SRCs) disclosing, and all firms disclosing the identity in the audited notes, or affirming no major customers. We expect that firms are more likely to disclose when they engage higher-quality auditors who have specialized knowledge of 10-K regulations. We hand-collect a sample of more than 26,000 (34,000) major customer disclosures that we use for our main tests (voluntary disclosure tests). We find that firms are more likely to mandatorily disclose their major customers' identity when audited by either an office- or national-level specialist whose clientele consists largely of firms with major customers. We corroborate these results with other higher-quality auditor measures: Big N, second tier, and office size. We also show that SRCs are more likely to voluntarily disclose when they engage a higher-quality auditor. We provide further evidence of an association between voluntary disclosure and a higher-quality auditor by ranking disclosure quality on audited disclosure, nonaudited disclosure, and no disclosure. JEL Classifications: M42; M41; D23. Data Availability: All data are available from public sources identified in the text.

Download Full-text

Influential Chief Marketing Officers and Management Revenue Forecasts

The Accounting Review ◽

10.2308/accr-51946 ◽

2017 ◽

Vol 93 (4) ◽

pp. 253-281 ◽

Cited By ~ 3

Author(s):

David S. Koo ◽

Dongyoung Lee

Keyword(s):

Propensity Score ◽

Voluntary Disclosure ◽

Data Availability ◽

Matched Pair ◽

Top Management ◽

Chief Marketing Officer ◽

Chief Marketing Officers ◽

Revenue Forecast ◽

Jel Classifications

ABSTRACT We examine the role of the chief marketing officer (CMO) in corporate voluntary disclosure of future revenues. Using a sample of S&P 1500 firms for the period from 2003 to 2011, we find that the presence of an influential CMO in top management is positively associated with the likelihood of a firm issuing a management revenue forecast. We also find that firms with an influential CMO provide more accurate revenue forecasts than other firms. These findings extend to long-window change analyses and are robust to the use of a propensity score matched-pair approach. Overall, the results are consistent with the notion that CMO influence in top management appears to play an important role in voluntary revenue disclosures. JEL Classifications: M12; M31; M41. Data Availability: All data are publicly available from sources identified in the paper.

Download Full-text

Does Blind Tasting Work? Another Look

Journal of Wine Economics ◽

10.1017/jwe.2019.25 ◽

2019 ◽

Vol 14 (3) ◽

pp. 309-320

Author(s):

Kevin W. Capehart

Keyword(s):

Selection Bias ◽

Self Selection ◽

The Impact ◽

Biased Estimates ◽

Jel Classifications

AbstractA study entitled “Does Blind Tasting Work? Investigating the Impact of Training on Blind Tasting Accuracy and Wine Preference,” published in the Proceedings issues of this journal, analyzed the effects of training on blind wine tasting accuracy (Wang and Prešern, 2018). I point out two issues with that study and reanalyze their data. I find that the effects of training on accuracy are small, even without controlling for self-selection bias that may produce upwardly biased estimates. To the extent training works, it does not seem to work well and it may only work as a selection device. (JEL Classifications: C91, D83, L66)

Download Full-text

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

Sustainability ◽

10.3390/su13179955 ◽

2021 ◽

Vol 13 (17) ◽

pp. 9955

Author(s):

Jaehong Lee ◽

Suyon Kim ◽

Eunsoo Kim

Keyword(s):

Climate Change ◽

Control System ◽

Human Resources ◽

Internal Control ◽

Carbon Emissions ◽

Voluntary Disclosure ◽

Firm Value ◽

Positive Role ◽

Internal Control System ◽

The Relationship

The purpose of this study is to examine the relationship between the voluntary disclosure of carbon emissions and firm value. In addition, we examine whether the human resources of the internal control system affect the relationship between the voluntary disclosure of carbon emissions and firm value with data from the Korean stock market from 2014 to 2019. This study shows that the firms that voluntarily disclose information on carbon emissions increase their value. Additionally, the sufficient number and working experience of internal control personnel in each accounting, financing, and information technology department positively affects the relationship between voluntary disclosure and firm value. We additionally find an effect of the awareness level on climate change on firm value. That is, firms that are active on climate change rather than merely disclosing information. Finally, we find the positive role of Environment, Social and Governance (ESG), implying a superior management environment that leads to better disclosure practices.

Download Full-text

Does External Assurance Enhance the Credibility of CSR Reports? Evidence from CSR-Related Misconduct Events in Taiwan

Auditing A Journal of Practice & Theory ◽

10.2308/ajpt-52418 ◽

2019 ◽

Vol 38 (4) ◽

pp. 101-130 ◽

Cited By ~ 7

Author(s):

Kai Du ◽

Shing-Jen Wu

Keyword(s):

Firm Value ◽

Data Availability ◽

Repeat Offenders ◽

Listed Firms ◽

Perceived Credibility ◽

Corporate Social ◽

First Time ◽

Jel Classifications ◽

Country Specific

SUMMARY This study examines the credibility of corporate social responsibility (CSR) reports and the role of external assurance on CSR reports. Based on a sample of listed firms in Taiwan, we find that the issuance of CSR reports is not associated with a lower incidence, or frequency, of future CSR-related misconduct, unless accompanied by external assurance. In other words, external assurance can enhance the credibility of CSR reports. Moreover, the perceived credibility of CSR reports depends on whether firms genuinely fulfill their CSR commitments. For first-time offenders, prior CSR reports play a significant role in protecting firm value when misconduct does occur; however, for repeat offenders, such an insurance role does not exist, regardless of whether the CSR report is assured or not. Our findings attest to the benefits of CSR assurance and underscore the importance of understanding CSR practice in the context of country-specific institutions. JEL Classifications: M14; M41; M42. Data Availability: Data are available from sources identified in the paper. Manually collected data on CSR-related misconduct events will be provided upon request.

Download Full-text