Does corporate governance enhance the appreciation of mandatory environmental disclosure by financial markets?

摘要

This paper investigates if mandated disclosure about environmental risks and obligations enhances the information set available to analysts and how a firm's governance affects such a relation. Government policies mandating such disclosure are potentially a tool to force firms to change their environmental practices, especially if financial markets pick up on the released information and exert pressures upon corporate management for further actions. We focus on 172 non-financial firms subject to mandated environmental disclosure. Results show that mandated disclosure enhances financial analysts' information set, as proxied by their forecast consensus and overall uncertainty. Analysts seem able to assess if there are inconsistencies between a firm's disclosure and its environmental impact. Moreover, mandated environmental disclosure substitutes for weak corporate governance in enhancing analysts' information set. In other words, mandated environmental disclosure does not relate to analysts' information set in the presence of good governance but does for firms with weak governance. Hence, mandatory disclosure may act as an environmental governance mechanism, either complementing or substituting for a firm's own governance.