Mapping the influence: Institutional blockholder coordination and climate change risk disclosure

This study investigates the relationship between institutional blockholder coordination, proxied by geographic proximity, and climate change risk disclosure. Using a sample of 2,887 firm-year observations for S&P 500 companies from 2010 to 2022, we reveal that a firm's climate change risk disclosure decreases when its institutional blockholders are more coordinated. In addition, we find that the negative relationship between institutional blockholder coordination and climate change risk disclosure manifests more in firms with less diversified institutional blockholders, a smaller number of institutional blockholders, a prominent position to their blockholders, and more dedicated institutional blockholder ownership. Moreover, we find that the negative association between institutional blockholder coordination and climate change risk disclosure is more pronounced in firms with corporate general counsels, a non-concentrated customer base, higher asset tangibility, and those that are environmentally sensitive. Our main conclusion still holds after using an alternative measure for climate change risk disclosure as well as a battery of endogeneity tests. Finally, we propose that institutional blockholder coordination lessens climate change risk disclosure through the channel of increased performance-induced CEO dismissal. Collectively, this study provides insightful implications for academics, financial statement users, regulators, and policymakers.