Article2024

Impact of corporate climate change disclosure on firm performance: empirical evidence from an emerging economy

Biswajit Ghose · Nivaj Gogoi · Premendra Kumar Singh · Kiran Gope

28 citations0/0 files storedSustainability Accounting Management and Policy Journal

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Corporate Social Responsibility Reporting Sustainable Finance and Green Bonds Corporate Governance and Financial Management

Abstract

Purpose This study aims to investigate the impact of corporate climate change disclosure (CCD) on the financial performance of Indian firms. Design/methodology/approach The study is grounded in the principles of signalling theory, legitimacy theory and the cost-benefit analysis approach. The sample for the study includes 77 Indian firms from 2018–2019 to 2021–2022. Required data are collected from published annual reports, sustainability reports and the Ace Equity Database. The explanatory variable CCD is measured using content analysis based on the Task Force on Climate-related Financial Disclosures (TCFD) framework. The panel fixed-effects or random-effects models have been considered for hypotheses testing. Findings The disclosure level of CCD and its different components is found to be moderate with an average score of 0.364 among top Indian firms. Regression results reveal a significant positive association between CCD on firms’ market-based performance, suggesting its long-term benefits. Besides, additional analysis indicates the differential impact of CCD on financial performance based on firms’ CEO duality status, industry affiliation and pre-COVID and post-COVID period, thus establishing their moderating role in the observed relationship. Practical implications The study highlights the necessity of enhancing climate-related disclosure by Indian firms and strategically leveraging the same to boost their financial performance. Originality/value Few studies have examined the implications of CCD (based on the TCFD framework) on firm performance. Moreover, exploring the moderating role of CEO duality, industry type and COVID-19 in the CCD and firm performance relationship is a novel empirical contribution.

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References

1995What Do We Know about Capital Structure? Some Evidence from International Data 2015ESG and financial performance: aggregated evidence from more than 2000 empirical studies 2019The Sustainable Development Goals Report 2019 1998Meta-analytic reviews of board composition, leadership structure, and financial performance 2014Gender diversity, board independence, environmental committee and greenhouse gas disclosure 2010Does it really pay to be green? Determinants and consequences of proactive environmental strategies 2001Determinants of Capital Structure and Adjustment to Long Run Target: Evidence From UK Company Panel Data 2010An empirical investigation of environmental performance and the market value of the firm

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