Presentation
Carbon Management Strategy, Carbon Disclosures and Firm Value
American Accounting Association Annual Meeting 2018
(2018)
Abstract
Corporate Social Responsibility (CSR) refers to the initiatives undertaken by a corporation to measure its efforts to improve the environment and social well-being. One of the aspects of CSR pertains to the disclosure of emission information and carbon management strategy (CMS). In this paper, we examine the role of an effective CMS on the emission disclosure behavior of firms. Emissions can be categorized as direct emissions, owned or controlled by firms, and indirect emissions, which are a consequence of the activities of the firms but are not owned or controlled by them. By using the information from Carbon Disclosure Project’s (CDP) Climate Change Information Survey we find that firms adopting an effective CMS are more likely to disclose the information about both direct and indirect emissions. Another inquiry of this paper is to test how firms benefit from adopting superior quality CMS. After controlling the amount of both direct and indirect emissions, as well as firm-specific factors, we find that the value of the firm increases with the quality of the CMS. These findings are robust because we used various measures for firm value. We also find that the quantity of direct emissions is negatively associated with firm values, a finding consistent with recent literature. However, there is no association between indirect emissions and firm value. In addition, we document that an increase in one unit of CMS score significantly reduces the quantity of direct emissions, which potentially would positively impact the value of the firms. Additional analysis finds that the disclosures of direct emissions, driven by CMS, also improve the value of the firms. Overall, our findings establish the importance of an effective CMS that brings positive benefits for the firms in terms of market value, also helping to reduce carbon footprints to ensure environmental sustainability.
Disciplines
Publication Date
2018
Citation Information
Mahfuja Malik and Kathy Kanwalroop Dhanda. "Carbon Management Strategy, Carbon Disclosures and Firm Value" American Accounting Association Annual Meeting 2018 (2018) Available at: http://works.bepress.com/mahfuja_malik/20/