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The Relevance to Investors of Greenhouse Gas Emission Disclosures
Author(s) -
Griffin Paul A.,
Lont David H.,
Sun Estelle Y.
Publication year - 2017
Publication title -
contemporary accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.769
H-Index - 99
eISSN - 1911-3846
pISSN - 0823-9150
DOI - 10.1111/1911-3846.12298
Subject(s) - greenhouse gas , valuation (finance) , equity (law) , capitalization , market value , market capitalization , equity value , business , value (mathematics) , economics , financial economics , monetary economics , finance , stock market , ecology , political science , law , biology , debt , paleontology , linguistics , philosophy , horse , machine learning , debt levels and flows , external debt , computer science
This study finds that investors price firms' greenhouse gas ( GHG ) emissions as a negative component of equity value, and this valuation discount does not differ between firms that voluntarily disclose to the Carbon Disclosure Project ( CDP ) and nondisclosing firms. We derive the GHG emissions for nondisclosers from an estimation model that incorporates firm characteristics and industry. The finding that investors view CDP amounts and estimates of emissions as equally value‐relevant suggests that equity values reflect GHG information from channels other than the CDP . An event study of investors' response to emission‐related information in firms' 8‐K filings further supports this finding. Economically, our results suggest that, for the median S&P 500 firm, GHG emissions impose a market‐implied equity discount of $79 per ton, representing about one‐half of 1 percent of market capitalization.