The real effects of risk disclosures : evidence from climate change reporting in 10-Ks

Jeong-Bon KIM; Chong WANG; Feng WU

doi:10.1007/s11142-022-09687-z

The real effects of risk disclosures : evidence from climate change reporting in 10-Ks

Jeong-Bon KIM, Chong WANG^*, Feng WU

^*Corresponding author for this work

Department of Accountancy

Research output: Journal Publications › Journal Article (refereed) › peer-review

14 Citations (Scopus)

Abstract

We examine the economic impacts of risk disclosures in accounting reports on the real decisions made by information senders (i.e., managers of the disclosing firms). In so doing, we exploit the SEC rule enacted in 2010 regarding climate change risk (CCR) reporting in 10-Ks as a quasi-natural experimental setting in which to apply a difference-in-differences analysis. We focus on CCR because of its vast influence on economic activities and the relative ease of identifying managerial behaviors related to climate change. Our results reveal that CCR-disclosing firms tend to engage more (less) in pro-environmental (anti-environmental) activities after the SEC 2010 rule. These real effects are more pronounced in firms that are under higher pressure from climate-minded external stakeholders and when firms’ businesses are more sensitive to climate change-related risks. We also find improved environmental performance in terms of reductions in the quantity, intensity, and cost of carbon emissions surrounding the SEC 2010 rule. Overall, our findings suggest that CCR disclosures alter corporate behaviors and help curb climate change.

Original language	English
Pages (from-to)	2271-2318
Number of pages	48
Journal	Review of Accounting Studies
Volume	28
Issue number	4
Early online date	14 May 2022
DOIs	https://doi.org/10.1007/s11142-022-09687-z
Publication status	Published - Dec 2023

Bibliographical note

We thank Peter Easton (the Editor), an anonymous referee, Alex Bassen, Wen Chen, Ahrum Choi, Yuyan Guan, Liangliang Jiang, Zhenbin Liu, Kerstin Lopatta, Ying Mao, Thomas Schmid, Byron Song, Nancy Su, Weiqiang Tan, Dragon Tang, Rui Wang, Wenming Wang, Zheng Wang, Xiangang Xin, Rengong Zhang, Yue Zhang, Liu Zheng, Hong Zou, and workshop participants at City University of Hong Kong, Hong Kong Baptist University, Lingnan University, Peking University, University of Hamburg, University of Hong Kong, and Yonsei University for valuable comments. The authors acknowledge research supports from Department of Accountancy, City University of Hong Kong, School of Accounting and Finance, Hong Kong Polytechnic University, and Department of Accountancy, Lingnan University. All errors are our own.

Publisher Copyright:
© 2022, The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature.

Keywords

Risk disclosure
Climate change
Real effect
10-K
Q54
K32
M41
D81

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1007/s11142-022-09687-zLicence: Other

https://link.springer.com/10.1007/s11142-022-09687-z

Cite this

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title = "The real effects of risk disclosures : evidence from climate change reporting in 10-Ks",

abstract = "We examine the economic impacts of risk disclosures in accounting reports on the real decisions made by information senders (i.e., managers of the disclosing firms). In so doing, we exploit the SEC rule enacted in 2010 regarding climate change risk (CCR) reporting in 10-Ks as a quasi-natural experimental setting in which to apply a difference-in-differences analysis. We focus on CCR because of its vast influence on economic activities and the relative ease of identifying managerial behaviors related to climate change. Our results reveal that CCR-disclosing firms tend to engage more (less) in pro-environmental (anti-environmental) activities after the SEC 2010 rule. These real effects are more pronounced in firms that are under higher pressure from climate-minded external stakeholders and when firms{\textquoteright} businesses are more sensitive to climate change-related risks. We also find improved environmental performance in terms of reductions in the quantity, intensity, and cost of carbon emissions surrounding the SEC 2010 rule. Overall, our findings suggest that CCR disclosures alter corporate behaviors and help curb climate change.",

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N2 - We examine the economic impacts of risk disclosures in accounting reports on the real decisions made by information senders (i.e., managers of the disclosing firms). In so doing, we exploit the SEC rule enacted in 2010 regarding climate change risk (CCR) reporting in 10-Ks as a quasi-natural experimental setting in which to apply a difference-in-differences analysis. We focus on CCR because of its vast influence on economic activities and the relative ease of identifying managerial behaviors related to climate change. Our results reveal that CCR-disclosing firms tend to engage more (less) in pro-environmental (anti-environmental) activities after the SEC 2010 rule. These real effects are more pronounced in firms that are under higher pressure from climate-minded external stakeholders and when firms’ businesses are more sensitive to climate change-related risks. We also find improved environmental performance in terms of reductions in the quantity, intensity, and cost of carbon emissions surrounding the SEC 2010 rule. Overall, our findings suggest that CCR disclosures alter corporate behaviors and help curb climate change.

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The real effects of risk disclosures : evidence from climate change reporting in 10-Ks

Abstract

Bibliographical note

Keywords

UN SDGs

Access to Document

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Cite this