After all, is it worth disclosing carbon emissions in Brazil?
Keywords:
Emissions Inventory, Carbon Performance, Cost of Capital, WACC, Signaling Theory.
Abstract
This research seeks to investigate the relationship between carbon emission disclosure and the cost of capital of Brazilian publicly traded companies in the period from 2012 to 2017. So far, in Brazil, there is no empirical evidence to prove the relevance of such voluntary disclosure for the capital market, as well as the impacts that result in a reduction in the cost of capital. This research aims to fill this gap from the perspective of the signaling theory. The analysis was conducted with 27 publicly traded Brazilian companies listed on B3. Two voluntary disclosure measures were used: the disclosure of GHG emissions inventories and the Carbon Disclosure Project (CDP) questionnaires capable of influencing the firms' weighted average cost of capital (WACC). The research hypotheses were verified by means of multiple regression with panel data. The results found contribute to the literature by providing evidence of the benefits of disclosing information about climate change on the cost of capital of Brazilian firms. It was identified that polluting companies have a lower cost of capital and, even under reputational risk, the advantages of disclosure still prevail. Moreover, they provide subsidies to regulatory policies on disclosure, management and carbon emissions of Brazilian companies.
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References
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SHARPE, William F. Capital asset prices: A theory of market equilibrium under conditions of risk. The journal of finance, v. 19, n. 3, p. 425-442, 1964.
ALVAREZ, Isabel Gallego. Impact of CO2 emission variation on firm performance. Business Strategy and the Environment, v. 21, n. 7, p. 435-454, 2012.
ARELLANO, Manuel et al. Computing robust standard errors for within-groups estimators. Oxford bulletin of Economics and Statistics, v. 49, n. 4, p. 431-434, 1987.
ARENT, Douglas J. et al. Key economic sectors and services. Climate Change 2014 Impacts, Adaptation and Vulnerability: Part A: Global and Sectoral Aspects, p. 659-708, 2015.
BACEN (2020). Banco Central do Brasil. Disponível em < https://dadosabertos.bcb.gov.br/>. Acesso em 21 Ago. 2020.
BELAL, Ataur Rahman et al. Corporate environmental and climate change disclosures: empirical evidence from Bangladesh. In: Research in Accounting in Emerging Economies. Emerald Group Publishing Limited, 2010.
BEYER, Anne et al. The financial reporting environment: Review of the recent literature. Journal of accounting and economics, v. 50, n. 2-3, p. 296-343, 2010.
BONETTI, Pietro; CHO, Charles H.; MICHELON, Giovanna. Environmental disclosure and the cost of capital: Evidence from the Fukushima nuclear disaster. Available at SSRN 2373877, 2015.
B3 (2019). Brasil, Bolsa, Balcão. Disponível em < http://www.b3.com.br/pt_br/market-data-e-indices/indices/indices-de-governanca/>. Acesso em 30 mar. 2020.
CDP (2020). Carbon Disclosure Project. Disponível em < https://www.cdp.net/pt/>. Acesso em 23 Ago. 2020.
CROISSANT, Yves; MILLO, Giovanni. Panel data econometrics in R: The plm package. Journal of statistical software, v. 27, n. 2, 2008.
DE OLIVEIRA, João Lucas Mattos Bodart et al. O Nível de Transparência Importa? Uma Análise do Efeito do Nível de Transparência Sobre o Custo Médio Ponderado de Capital.
DE SANTANA, L. M.; GÓIS, A. D.; DE LUCA, M. M. M.; VASCONCELOS, A. C. Relação entre disclosure socioambiental, práticas de governança corporativa e desempenho empresarial. Organizações em Contexto, v. 11, n. 21, p. 49-72, 2015.
DHALIWAL, Dan S. et al. Auditor fees and cost of debt. Journal of accounting, auditing & finance, v. 23, n. 1, p. 1-22, 2008.
DHALIWAL, Dan S. et al. Voluntary nonfinancial disclosure and the cost of equity capital: The initiation of corporate social responsibility reporting. The accounting review, v. 86, n. 1, p. 59-100, 2011.
ECCLES, Robert G. et al. Pay for environmental performance: The effect of incentive provision on carbon emissions. Harvard Business School working paper# 13-043, 2012.
EMBONG, Zaini; MOHD‐SALEH, Norman; HASSAN, Mohamat Sabri. Firm size, disclosure and cost of equity capital. Asian Review of Accounting, 2012.
FAMA, Eugene F.; FRENCH, Kenneth R. The cross‐section of expected stock returns. the Journal of Finance, v. 47, n. 2, p. 427-465, 1992.
FAMA, Eugene F.; FRENCH, Kenneth R. Size and book‐to‐market factors in earnings and returns. The journal of finance, v. 50, n. 1, p. 131-155, 1995.
FGV. Fundação Getúlio Vargas. Registro Público de Emissões: Inventários de emissões. São Paulo: FGV, 2018.
GRIFFIN, Paul A.; LONT, David H.; SUN, Estelle Y. The relevance to investors of greenhouse gas emission disclosures. Contemporary Accounting Research, v. 34, n. 2, p. 1265-1297, 2017.
HASSAN, Omaima AG et al. The value relevance of disclosure: Evidence from the emerging capital market of Egypt. The International Journal of Accounting, v. 44, n. 1, p. 79-102, 2009.
HE, Yu; TANG, Qingliang; WANG, Kaitian. Carbon disclosure, carbon performance, and cost of capital. China Journal of Accounting Studies, v. 1, n. 3-4, p. 190-220, 2013.
HONDA, Yuzo. Testing the error components model with non-normal disturbances. The Review of Economic Studies, v. 52, n. 4, p. 681-690, 1985.
IMDADULLAH, Muhammad; ASLAM, Muhammad; ALTAF, Saima. mctest: An R Package for Detection of Collinearity among Regressors. R J., v. 8, n. 2, p. 495, 2016.
JO, Hoje; HARJOTO, Maretno A. Corporate governance and firm value: The impact of corporate social responsibility. Journal of business ethics, v. 103, n. 3, p. 351-383, 2011.
JUNG, Juhyun; HERBOHN, Kathleen; CLARKSON, Peter. The impact of a firm’s carbon risk profile on the cost of debt capital: Evidence from Australian firms. University of Queensland, 2014.
KIM, Yeon-Bok; AN, Hyoung Tae; KIM, Jong Dae. The effect of carbon risk on the cost of equity capital. Journal of Cleaner Production, v. 93, p. 279-287, 2015.
KING, Andrew A.; LENOX, Michael J. Does it really pay to be green? An empirical study of firm environmental and financial performance: An empirical study of firm environmental and financial performance. Journal of Industrial Ecology, v. 5, n. 1, p. 105-116, 2001.
LAMBERT, Richard; LEUZ, Christian; VERRECCHIA, Robert E. Accounting information, disclosure, and the cost of capital. Journal of accounting research, v. 45, n. 2, p. 385-420, 2007.
LEWANDOWSKI, Stefan. Corporate carbon and financial performance: The role of emission reductions. Business Strategy and the Environment, v. 26, n. 8, p. 1196-1211, 2017.
LI, Yan; YANG, Holly I.-Hwa. Disclosure and cost of equity capital: An analysis at the market level. 2012.
LINNENLUECKE, Martina K.; BIRT, Jacqueline; GRIFFITHS, Andrew. The role of accounting in supporting adaptation to climate change. Accounting & finance, v. 55, n. 3, p. 607-625, 2015.
MARCOVITCH, Jacques. As empresas e a legislação verde no Brasil. A Redução de Emissões de Gases de Efeito Estufa e a Legislação Brasileira, p. 2.
MARTINS, Vinícius Gomes; MONTE, Paulo Aguiar do; MACHADO, Márcio André Veras. Análise das Hipóteses de Risco e Mispricing dos Accruals: evidências do Brasil. Revista Brasileira de Gestão de Negócios, v. 21, n. 1, p. 169-186, 2019.
MATSUMURA, Ella Mae; PRAKASH, Rachna; VERA-MUNOZ, Sandra C. Firm-value effects of carbon emissions and carbon disclosures. The accounting review, v. 89, n. 2, p. 695-724, 2014.
MODIGLIANI, Franco; MILLER, Merton H. The cost of capital, corporation finance and the theory of investment. The American economic review, v. 48, n. 3, p. 261-297, 1958.
MODIGLIANI, Franco; MILLER, Merton H. Corporate income taxes and the cost of capital: a correction. The American economic review, v. 53, n. 3, p. 433-443, 1963.
PLUMLEE, Marlene et al. Voluntary environmental disclosure quality and firm value: Further evidence. Journal of accounting and public policy, v. 34, n. 4, p. 336-361, 2015.
PRATES, Juliana Costa Ribeiro. Desempenho de carbono e remuneração de executivos: evidências sobre o mercado brasileiro. 2019. Dissertação de Mestrado. Universidade Federal de Pernambuco.Disponível em <.nhttps://repositorio.ufpe.br/handle/123456789/33892>
RAHMAN, Noor Raida Binti; JOHARI, Nor Hasimah Binti; MOHAMAD, Nor Edi Azhar Binti. Carbon Emission Disclosure and the Cost of Capital: An Analysis of Malaysian Capital Market. In: SHS Web of Conferences. EDP Sciences, 2017. p. 00020.
RIBEIRO, Maisa de Souza; LISBOA, Lázaro Plácido. Passivo ambiental. Revista Brasileira de Contabilidade, v. 126, p. 8-19, 2000.
SANTOS, Roberto Oliveira; SILVA GOMES, Sônia Maria da; OLIVEIRA, Nverson da Cruz. O Impacto Do Inventário De Emissões (Gee) Nos Desempenhos Operacional E Financeiro Das Empresas Participantes Do Ghg. REVISTA AMBIENTE CONTÁBIL-Universidade Federal do Rio Grande do Norte-ISSN 2176-9036, v. 10, n. 2, p. 266-284, 2018.
SHARPE, William F. Capital asset prices: A theory of market equilibrium under conditions of risk. The journal of finance, v. 19, n. 3, p. 425-442, 1964.
Published
2023-02-10
How to Cite
Prates, J. C. R., Cabral, A. M. R., Avelino, B. C., & Lamounier, W. M. (2023). After all, is it worth disclosing carbon emissions in Brazil?. Enfoque: Reflexão Contábil, 42(1), 17-32. https://doi.org/10.4025/enfoque.v42i1.58220
Section
Original Articles
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