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Stock Market Reaction to Mandatory Carbon Disclosure Announcements: The Role of Institutional Investors

Author

Listed:
  • Chris Florackis

    (University of Liverpool)

  • Dewan Muktadir-Al-Mukit

    (Sheffield Hallam University)

  • Sushil Sainani

    (University of Liverpool)

  • John Ziyang Zhang

    (Audencia Business School)

Abstract

We examine the stock market reaction to mandatory carbon disclosure (MCD) announcements in the UK, the first country to mandate the disclosure of greenhouse gas (GHG) emissions by listed firms. Our analysis reveals that, while the overall market was not greatly affected, firms with high carbon intensity and substantial institutional ownership experienced negative abnormal stock returns. This effect persists-and even becomes more pronounced-for firms owned by long-term institutional investors and those from countries with strong social norms surrounding climate and sustainability. Additionally, we find that heightened institutional investor attention on announcement days amplified price pressure, leading to more negative stock returns for these firms. Collectively, our findings underscore how mandatory carbon disclosure announcements enhanced the salience of carbon information, prompting institutional investors to incorporate carbon-related considerations into their decision-making processes.

Suggested Citation

  • Chris Florackis & Dewan Muktadir-Al-Mukit & Sushil Sainani & John Ziyang Zhang, 2025. "Stock Market Reaction to Mandatory Carbon Disclosure Announcements: The Role of Institutional Investors," Post-Print hal-04979126, HAL.
    • Handle: RePEc:hal:journl:hal-04979126
    DOI: 10.1016/j.intfin.2025.102113
    Note: View the original document on HAL open archive server: https://hal.science/hal-04979126v1
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    JEL classification: G14 G32 G38 Q51 Q54 Mandatory carbon reporting regulations Carbon performance Stock market reaction Institutional investors; JEL classification: G14; G32; G38; Q51; Q54 Mandatory carbon reporting regulations; Carbon performance; Stock market reaction; Institutional investors; Mandatory carbon reporting regulations;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • 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
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • 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

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