Rising temperatures, rising transparency: Revealing the financial benefits of climate change disclosure

Abstract

In the past two decades, climate change and global warming have emerged as the most pressing environmental issues on a global scale. One of the main challenges in creating a sustainable economy is the effective management of the risks posed by climate change. The relevance of these topics has heightened the importance of climate change disclosure (CCD), which has increasingly attracted the interest of academics. However, the financial effects of CCD remain an area that is still underexplored. This study aims to fill this important gap by investigating the impact of CCD via social media on the cost of capital and firm value. The econometric analysis, conducted on a sample of 134 international firms over the period from 2019 to 2021, reveals that CCD has a negative effect on the cost of capital and a positive impact on firm value. These results provide significant contributions to the academic literature and offer important practical implications for firms, policymakers, and standard setters.