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Are Environmentally Sensitive Firms More Likely to Release Corporate Environmental Disclosures? Evidence From Environmental Risk Management

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Listed:
  • Chune Young Chung
  • Incheol Kim
  • Rong Yang

Abstract

This study examines the environmental risk management practices of US firms operating in environmentally sensitive industries. Using two proxy variables for ex ante environmental policy risk—firm‐level toxic chemical emissions and climate‐related keywords in annual financial statements—we demonstrate that firms facing high ex ante environmental policy risk tend to increase the frequency and length of their voluntary sustainability reports. Additionally, we find that proactive sustainability disclosures significantly mitigate firm‐level systematic risk (beta) and associated litigation risk. This risk reduction is more pronounced among firms with substantial green innovations and stronger corporate governance practices. Overall, this study highlights the causes and consequences of voluntary sustainability reports, focusing on how environmentally sensitive firms manage environmental risk through these publications.

Suggested Citation

  • Chune Young Chung & Incheol Kim & Rong Yang, 2025. "Are Environmentally Sensitive Firms More Likely to Release Corporate Environmental Disclosures? Evidence From Environmental Risk Management," Business Strategy and the Environment, Wiley Blackwell, vol. 34(3), pages 3338-3359, March.
    • Handle: RePEc:bla:bstrat:v:34:y:2025:i:3:p:3338-3359
    DOI: 10.1002/bse.4158
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    References listed on IDEAS

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