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Corporate carbon risk exposure, voluntary disclosure, and financial reporting quality

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  • Tesfaye T. Lemma
  • Mehrzad Azmi Shabestari
  • Martin Freedman
  • Mthokozisi Mlilo

Abstract

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.

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  • Tesfaye T. Lemma & Mehrzad Azmi Shabestari & Martin Freedman & Mthokozisi Mlilo, 2020. "Corporate carbon risk exposure, voluntary disclosure, and financial reporting quality," Business Strategy and the Environment, Wiley Blackwell, vol. 29(5), pages 2130-2143, July.
    • Handle: RePEc:bla:bstrat:v:29:y:2020:i:5:p:2130-2143
    DOI: 10.1002/bse.2499
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    3. Patrick Velte, 2021. "Environmental performance, carbon performance and earnings management: Empirical evidence for the European capital market," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(1), pages 42-53, January.
    4. Yong-Shik Kim, 2023. "The Association between Voluntary Carbon Disclosure and Accounting Comparability: Examining the Moderating Effect of Korean Business Groups," Sustainability, MDPI, vol. 15(6), pages 1-17, March.
    5. Wu, Zhenshu, 2023. "Essays in corporate finance and ESG," Other publications TiSEM fe6f9604-d0c5-46f3-9492-f, Tilburg University, School of Economics and Management.
    6. Liu, Chengyun & Su, Kun & Zhang, Miaomiao, 2021. "Water disclosure and financial reporting quality for social changes: Empirical evidence from China," Technological Forecasting and Social Change, Elsevier, vol. 166(C).
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