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Corporate carbon risk exposure, voluntary disclosure, and financial reporting quality
Author(s) -
Lemma Tesfaye T.,
Shabestari Mehrzad Azmi,
Freedman Martin,
Mlilo Mthokozisi
Publication year - 2020
Publication title -
business strategy and the environment
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.123
H-Index - 105
eISSN - 1099-0836
pISSN - 0964-4733
DOI - 10.1002/bse.2499
Subject(s) - voluntary disclosure , turnover , business , quality (philosophy) , stock exchange , stock (firearms) , accounting , finance , economics , mechanical engineering , philosophy , management , epistemology , engineering
The study examines whether corporate carbon risk exposure is associated with financial reporting quality and whether voluntary carbon disclosure mediates the relationship. We analyze data drawn from firms traded on the Johannesburg Stock Exchange (JSE), for the period 2011 to 2015. We document robust evidence that firms with higher carbon risk exposure tend to provide financial statements of poorer quality (i.e., direct effect) and this association is partially mediated through voluntary carbon disclosure (i.e., indirect effect). The overall negative association between corporate carbon risk exposure and the firm's financial reporting quality is partly explained by the quality of voluntary carbon disclosure.