Do corporate climate change disclosures affect information asymmetry and investment efficiency? An international study

Motivated by the highlighted global interest in climate change, the aim of the thesis is to provide a better understanding of corporate climate change disclosures and their economic impacts in the capital market. More specifically, this thesis incorporates two empirical studies that examines whether and how corporate climate change disclosures are associated with information asymmetry and investment efficiency. The first study examines the association between corporate climate change disclosures and information asymmetry and how this association is moderated by contextual factors such as institutional investors and corporate governance. Based on 9,031 firm-year observations covering the period CDP2006–CDP2019 across 36 countries, the study finds that corporate climate change disclosures are negatively associated with information asymmetry. Further analyses show that the negative association between climate change disclosures and information asymmetry is stronger for firms with a higher level of institutional ownership and better corporate governance performance. The first study also demonstrates that the association between climate change disclosures and information asymmetry is more pronounced for firms operating in countries with stakeholder orientation, emissions trading schemes (ETSs) and superior climate change performance. The second study examines the association between corporate climate change disclosures and firm-level investment efficiency. Based on 7,665 firm-year observations covering the period CDP2008–CDP2019 across 47 countries, the study reveals that climate change disclosures improve investment efficiency by reducing both over-investment and under-investment. Further analyses show that the positive association between climate change disclosures and investment efficiency is stronger for firms with a higher level of institutional ownership, better corporate governance performance and greater analysts’ coverage. The study also reports that the association between climate change disclosures and investment efficiency is stronger for firms operating in countries with stakeholder-orientation, emissions trading schemes (ETSs) and superior climate change performance. The findings of this research contribute to the literature by providing empirical evidence which supports agency theory and signalling theory in the climate change disclosure context. The findings contribute to the ongoing debate on why firms should consider disclosing more climate change-related information. Furthermore, they have important implications for capital market participants, managers and policy makers, the CDP, and professional accountants and accounting educators across the world.