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Climate Change and Firm Valuation: Evidence from a Quasi-Natural Experiment

Author

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  • Philipp KRÜGER

    (University of Geneva and Swiss Finance Institute)

Abstract

In this paper, I estimate the effect of mandatory greenhouse gas (GHG) emissions disclosure on corporate value. Using the introduction of mandatory GHG emissions reporting for firms listed on the Main Market of the London Stock Exchange as a source of exogenous variation, I find that firms most heavily affected by the regulation experience significantly positive valuation effects. Increases in value are strongest for large firms and for firms from carbon intensive industries (e.g., oil and gas). Valuation increases are driven by capital market effects such as higher liquidity and lower bid -- ask spreads for the most affected firms.

Suggested Citation

  • Philipp KRÜGER, 2015. "Climate Change and Firm Valuation: Evidence from a Quasi-Natural Experiment," Swiss Finance Institute Research Paper Series 15-40, Swiss Finance Institute.
  • Handle: RePEc:chf:rpseri:rp1540
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    File URL: http://ssrn.com/abstract=2565523
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    Cited by:

    1. Stefano Ramelli & Alexander F. Wagner & Richard J. Zeckhauser & Alexandre Ziegler, 2018. "Investor Rewards to Climate Responsibility: Evidence from the 2016 Climate Policy Shock," NBER Working Papers 25310, National Bureau of Economic Research, Inc.
    2. Ramelli, Stefano & Wagner, Alexander F. & Zeckhauser, Richard J. & Ziegler, Alexandre, 2018. "Stock Price Rewards to Climate Saints and Sinners: Evidence from the Trump Election," Working Paper Series rwp18-037, Harvard University, John F. Kennedy School of Government.
    3. Itzhak Ben-David & Stefanie Kleimeier & Michael Viehs, 2018. "Exporting Pollution: Where Do Multinational Firms Emit CO 2 ?," NBER Working Papers 25063, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Mandatory disclosure regulation; greenhouse gas emissions; climate change; valuation; difference-in-differences; value;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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