Climate change risk disclosure : a legitimation tool for companies with high carbon risk exposure in the U.S.

Molinari, Carolina (2022) Climate change risk disclosure : a legitimation tool for companies with high carbon risk exposure in the U.S. (DBA thesis), Kingston University, .


As one of the world’s top risks, climate change has severely impacted human and natural systems, evidenced by high temperatures, wildfires and floods. High-quality climate change disclosure has the potential to enable stakeholders to act on the information they receive, such as investors directing their capital to more sustainable companies, activists targeting large CO2 emitters and government tightening regulation. However, quality of climate-related disclosure remains an issue. Environmental disclosure has been studied since 1970s but results are still mixed in terms of the motivations for companies to provide disclosure. In this regard, legitimacy theory indicates that companies under legitimacy threats (e.g. high risk or high media visibility) provide higher levels of disclosure, while voluntary disclosure theory posits that better performers (e.g. better risk managers) would use more disclosure to showcase their superiority, while impression management suggests that companies tend to attribute successes to internal factors (e.g. strategy, management skills) and failures to external factors (e.g. market, regulation). This study applies both theories and employs logistic and OLS regressions, using a sample with 200 U.S. listed companies from high GHG emission industries (e.g. oil & gas, chemicals, and metals & mining). In alignment with legitimacy theory, results evidenced that GHG emissions risk and media visibility positively impact on the likelihood of a company to provide GHG emissions risk disclosure. Results also suggest that when there is increased GHG emissions risk level, companies increase their general disclosure four times more than their specific disclosure, which is potentially associated with a legitimation strategy of diverting stakeholders’ attention to the context instead of the company itself, also aligned with attributing their high risk levels to external factors, as suggested in impression management. In addition, media visibility was found to positively influence the extent of specific disclosure, which may be explained by stakeholders’ prior knowledge influencing information threshold as in voluntary disclosure theory.

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