Corporate Climate Risk Disclosure and Institutional Investor Holdings

This study investigates the impact of corporate climate risk disclosure on institutional investor shareholdings. The empirical results show that the disclosure of climate risk increases institutional investor ownership. The economic mechanism behind this finding is that climate risk disclosure reduces stock price crash risk, improves stock performance and promotes corporate reputation. Heterogeneous tests indicate that the positive relationship between the disclosure of climate risk exposure and institutional investor ownership is more pronounced for firms with a higher analyst following, non-state-owned firms, and after the 2015 New Environmental Protection Law. Further analyses show that institutional investors specifically focus on firms' disclosures on climate-related technology opportunities and strategic transformation information. This study is among the first to provide market-wide empirical evidence in the emerging market on how institutional investor ownership is affected by corporate climate risk disclosure, which further contributes to the mixed findings of how the financial market perceives climate risk information.