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Climate news and accounting comparability

Author

Listed:
  • Chircop, Justin
  • Nguyen, Nhat Q.
  • Nguyen, Tri T.

Abstract

We examine the effect of climate news on accounting comparability. We argue that climate news informs market participants about firms' climate exposure, inducing a reassessment of the firms' future cash flows. This reassessment increases the variance in accounting estimates, hence reducing accounting comparability among industry peers. Consistently, we find a negative relationship between market-level measures of climate news and one-year-ahead firm-level accounting comparability. This finding is robust to several sensitivity checks. This relationship is mediated by the intensity with which firms apply accounting standards to transform economic events into accounting numbers and moderated by the extent to which firms are exposed to climate risks and by firms' environmental performance. Our study contributes to the growing literature examining the negative effect of climate change on firm values and to the literature examining the determinants of accounting comparability. The practical implication of our study is that market participants should be cautious when comparing peer firms after periods of increased climate news.

Suggested Citation

  • Chircop, Justin & Nguyen, Nhat Q. & Nguyen, Tri T., 2025. "Climate news and accounting comparability," Advances in accounting, Elsevier, vol. 69(C).
    • Handle: RePEc:eee:advacc:v:69:y:2025:i:c:s0882611025000367
    DOI: 10.1016/j.adiac.2025.100841
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    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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