Abstract
We examine the relation between environmental disclosure and the cost of capital by exploiting the Fukushima nuclear disaster as a source of variation in the relevance of environmental information for investors. Using a large hand-collected sample of Japanese firms, we find that firms disclosing carbon emissions experience a lower increase in the cost of capital than non-disclosing firms. Cross-sectional analyses suggest that the association between disclosure and the cost of capital is driven by the increase in investor uncertainty about the energy supply shortage that followed the disaster rather than future regulatory costs. Moreover, we find that after the disaster, non-disclosing firms in the pre-disaster period increase their environmental disclosures to a greater extent relative to disclosing firms. Taken together, our results provide insight into the link between non-financial, unregulated disclosures and the cost of capital.
| Original language | English |
|---|---|
| Journal | European Accounting Review |
| Early online date | 21 May 2023 |
| DOIs | |
| Publication status | E-pub ahead of print - 21 May 2023 |
Bibliographical note
Funding Information:We appreciate helpful comments from the Editor (Beatriz Garcia Osma) and the two anonymous Reviewers. We further thank Vicente Bermejo, Anne Beyer, Ulf Brüggemann, Christoff Beuselinck, Willem Buijink, Christine Botosan, Hans Christensen, Maria Correia, Ties de Kok, Michele Fabrizi, Fani Kalogirou, Christian Laux, Christian Leuz, Gilad Livne, Miguel Minutti-Meza, Volkan Muslu, Julian Neira, Antonio Nicolo, Den Patten, Lorenzo Rocco, Grzegorz Trojanowski, Laurence Van Lent and participants of the XI Workshop on Empirical Research in Financial Accounting, the 37th European Accounting Association Annual Congress, the 50th British Accounting and Finance Association Conference, the 24th International Congress on Social and Environmental Accounting Research the 12th World Congress of Accounting Educators and Researchers, and the 36 Congrès de l’Association Francophone de Comptabilité (AFC), and research seminars at the University of Central Florida, the University of Exeter, the University of Manchester, the University of Miami, the South Western University of Finance and Economics, the University of Tilburg, HEC Lausanne, KAIST, Universität Paderborn and Wirtschaftsuniversität Wien. We thank Tino Bauer, Jane Cho, Fanta Esposito, Kiki Fanton, Mila Gabana, Mari Kato, and Nicola Maretto for their research assistance and are grateful to Asako Kimura, Keiji Takai, Yuki Tanaka, and Midori Shitamoto for their help with data collection. Charles Cho acknowledges the financial support from the ESSEC Foundation White Project Award, the Erivan K. Haub Chair in Business & Sustainability at the Schulich School of Business and the Global Research Network program through the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2016S1A2A2912421). ème
Publisher Copyright:
© 2023 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.
Structured keywords
- AF Accountability Sustainability and Governance