Corporate Environmental Disclosures and Risk Management
Posted: 17 Nov 2020
Date Written: September 30, 2020
This study examines the risk management engagement of U.S. firms in polluting industries. Using hand-collected voluntary corporate environmental reports, we find that a firm’s total toxic chemical releases increase the intensity of its corporate environmental disclosures, as measured by their issuance frequency and length. Proactive environmental disclosures significantly decrease industry-adjusted firm systematic risk (beta), especially in highly polluting industries. This risk reduction is more evident among firms that undertake green innovations. In addition, we find that firms with more socially connected boards and female directors exhibit greater risk reductions relative to their counterparts. Overall, this study highlights the mitigating effect of corporate environmental transparency on firm risk.
Keywords: corporate environmental responsibility; environmental disclosure; firm risk; corporate governance
JEL Classification: G32; G34
Suggested Citation: Suggested Citation