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ItemThe Value Relevance of a Firm's Carbon profile( 2018-08-31)This study revisits the valuation relevance of a firm’s carbon profile using a broader notion of a firm’s carbon profile, which includes carbon risk exposure, aside from emissions, and proactive carbon responses (PCRs), identified from publically available information. Initially, we use extant literature and interviews with 28 managers of high carbon emitting firms and five ESG analysts to inform the operationalisation of carbon-risk exposure and identification of PCRs from publically available data. From this, we test the valuation effects of our broader notion of a firm’s carbon profile using a modified Ohlson valuation model and a sample of 51 firms (122 firm-year observations) reporting under the NGER scheme with the necessary financial and market data. We document that, on average, a one standard deviation change in the level of the expanded carbon-risk exposure results in a penalty of 12% of market capitalisation of the sample firms on average. We also find that PCRs partially mitigate the documented penalty on high emitters. The interview results suggest that in terms of PCRs, managers and analysts perceive value in firms developing intangible carbon-related capabilities around adaptability, carbon leadership and stakeholder trust. Our empirical results are consistent with this proposition since we find that adaptability, carbon leadership and stakeholder trust partially mitigate the emissions penalty, whereas emissions reductions do not. Taken together these results are consistent with the argument that capital markets impound the valuation impacts of other carbon-risk exposure, aside from emissions, and PCRs identified from publically available information in firm valuations.
ItemCSR Disclosure and Corporate Reputation: Evidence from Firms’ Facebook Communication( 2018-07-11)This paper examines the impact of firms’ dissemination of corporate social responsibility (CSR) disclosure through Facebook on corporate reputation. We investigate this relationship empirically in the German setting by using a corporate reputation index that tracks the general public’s perceptions of corporate reputation over time. Using firms’ discretionary use of Facebook to communicate CSR information, we find that firms posting single or multiple CSR information experience a decrease in corporate reputation. More specifically, this effect becomes larger with time. Additional analyses indicate that non-professional stakeholders perceive reputation as being lower if a firm increases the number of CSR postings suggesting a diluting effect if CSR communication is high (quantity effect). However, if we differentiate postings based on whether their content relates to an environment, social or economic activity of a firm, we find a positive effect on reputation for firms posting environmental information (quality effect). Also, only firms with an above-average amount of earned media attention, as well as “Likes”, “Comments”, and “Shares” experience a significant decrease in corporate reputation with an increase in the number of CSR posts. Overall, findings suggest that non-professional stakeholders perceive social and economic activities related to CSR as a greenwashing tool with a doubtable sustainable impact. Only additional photos can turn over this negative effect with an increase in the number of CSR postings as such having a positive effect on corporate reputation possibly providing evidence to the non-professional stakeholders that a sustainable activity stays behind the verbal posting.