Corporate Carbon Emissions and Financial Performance: Does Carbon Disclosure Mediate the Relationship in the UK?

35 Pages Posted: 27 Mar 2017

See all articles by Yang Liu

Yang Liu

University of Reading-Henley Business School

Xiaoyan Zhou

University of Oxford-Smith School of Enterprise and the Environment

Jessica Yang

University of Reading - Henley Business School

Andreas G. F. Hoepner

Smurfit Graduate Business School, University College Dublin; European Commission - DG FISMA

Date Written: March 26, 2017

Abstract

Academic debate around the link between corporate environmental disclosures, environmental performance and financial performance is persistent and controversial. In this paper, we investigate whether and, if so, how carbon emission performance is related to corporate financial performance and how the disclosure of carbon emissions in the annual and standalone reports mediates such relationship. Specifically, we construct a 42-item disclosure index to quantify the quality of corporate carbon emissions disclosure for 62 FTSE 100 firms from the period 2010 to 2012. We find that while carbon emissions are negatively associated with financial performance, they are positively related to the level of carbon disclosure, which then leads to better financial performance at a marginal significance level. The findings show that the market responds to excessive carbon emissions; however, firms with poor carbon performance tend to use disclosure strategically to manage the legitimacy threat and to reduce information asymmetry.

Suggested Citation

Liu, Yang and Zhou, Xiaoyan and Yang, Jessica and Hoepner, Andreas G. F., Corporate Carbon Emissions and Financial Performance: Does Carbon Disclosure Mediate the Relationship in the UK? (March 26, 2017). Available at SSRN: https://ssrn.com/abstract=2941123 or http://dx.doi.org/10.2139/ssrn.2941123

Yang Liu (Contact Author)

University of Reading-Henley Business School ( email )

Whiteknights
Reading, Berkshire RG6 6UD
United Kingdom

Xiaoyan Zhou

University of Oxford-Smith School of Enterprise and the Environment

South Parks Road
P.O. Box 242
Oxford, Oxfirdshire OX1 3QY
United Kingdom
7921513972 (Phone)
7921513972 (Fax)

Jessica Yang

University of Reading - Henley Business School ( email )

Greenlands
Reading, Henley on Thames RG6 6AH
United Kingdom

Andreas G. F. Hoepner

Smurfit Graduate Business School, University College Dublin ( email )

Blackrock, Co. Dublin
Ireland

European Commission - DG FISMA ( email )

2 Rue de Spa
Brussels, 1000
Belgium

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
956
Abstract Views
2,990
Rank
177,885
PlumX Metrics