Disclosure effects, carbon emissions and corporate value

What is it about?

The main purpose of this study is to examine the impact of corporate carbon emissions and disclosure on corporate value, especially regarding whether disclosure helps to reduce uncertainty in valuation as predicted by carbon emissions using a unique data set on Japanese companies. We find that corporate carbon emissions have a negative relation with the market value of equity, the disclosure of carbon management has a positive relation with the market value of equity, and the positive relation between the disclosure of carbon management and the market value of equity is stronger with a larger volume of carbon emissions.

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Why is it important?

The authors provide the first empirical evidence of an interactive effect between the volume of carbon emissions and carbon management disclosure on the market value of equity. And, the results concerning the relation between environmental performance, disclosure, and market value are readily generalizable, especially as all companies emit carbon, either directly or indirectly. In addition, the results are arguably free of problems with sampling bias and endogeneity as the authors employ data obtained from the compulsory filing of carbon emissions information.