Carbon Disclosures and Industry Environment Sensitivity on Firm Performance

Abstract

The study was conducted to explore carbon disclosures and industry environment sensitivity on firm performance. The study evaluates firm performance by examining both market and accounting-based measures and how they relate to carbon disclosures. The carbon disclosing sample is got from listed firms in China that reported their carbon emissions from 2010 to 2018. Results indicate that carbon disclosing firms experience declined firm performance following carbon disclosure of 4.13 % for ROA and 4.22% for the Q ratio following disclosure compared to the non-disclosing firms and there’s a decreased firm performance for the control sample of carbon non-disclosing companies, indication that environmental disclosures are linked with specific and costly risk disclosures which may castigate a company’s environmental strategies over specified time periods as disclosures tend to result to accountability. We show why firm performance declined during the disclosure period despite prior research indicating that carbon-disclosing firms are characterized by increased firm performance. Despite the ever-increasing stringent measures and standards of environmental disclosures, environmentally sensitive industries are characterized by increased firm performance during the carbon disclosure period. We supplement the ever-expanding stream of research that evaluates the effects of carbon disclosures.