Stock Price Response to Voluntary Carbon Information Disclosure: The Moderating Effect of Carbon Risk Management

다국어 초록 (Multilingual Abstract)

Investors have increasingly requested firms to provide their carbon-related information in order to assess potential values and risks in a more proper way. Carbon information disclosure has now become a key issue to companies as well as to financial institutions. The carbon disclosure project (CDP) is the most reliable carbon information source and more than 400 financial institutions are participating in it. Companies, usually large-sized and globally operated firms, are asked to disclose their carbon information including greenhouse gases (GHG) emissions, potential risks regarding to climate change, and carbon strategies and practices for reducing risks and harvesting potential opportunities. However, very little research has been conducted in investigating how carbon information disclosure influences financial stock markets, in others words, how stock price responds to a firm's carbon disclosure.
We analyze the effect of CDP disclosure on stock markets using CDP Korea data. This paper is the first to investigate the stock response about carbon disclosure and carbon risk management. Firstly, We analyze how CDP disclosure affects shareholder wealth of companies responding to the CDP 2008 and 2009. we find that CDP disclosure has significantly negative cumulative abnormal return for a week after the announcement day. The intensive emission firms have more severe negative shock. We can't find a significantly systematic pattern for the CDP non disclosure. Therefore, Carbon disclosure is at least a cost factor in the short run.
Secondly, We investigate whether carbon risk management reduces the negative CDP disclosure effect. In the emissions intensive industry, managing carbon risk well reduces the negative CDP disclosure effect on the stock price. High carbon risk management firms have less negative stock responses than low carbon risk management firms.
These findings suggest the following three main results. Firstly, In the short run, CDP disclosure is a cost factor. Secondly, Investors view energy intensive firms with more carbon risk management as better prepared for possible future environmental regulations. Finally, investors view the CDP disclosure of the non energy intensive firms as a bad news, such as a cost burden.

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