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Mapping the influence: Institutional blockholder coordination and climate change risk disclosure
Mohamed Khalifa1, Subhan Ullah2, Tarek Abdelfattah1
1Nottingham University Business School, Jubilee Campus, Wollaton Road, Nottingham, NG8 1BB, UK; Accounting Department, Faculty of Commerce, Mansoura University, El Gomhoria street, Mansoura, Egypt.
Journal of Environmental Management
|October 17, 2024
Summary
Institutional blockholder coordination, measured by geographic proximity, reduces climate change risk disclosure. This effect is stronger in firms with concentrated ownership and specific corporate structures, potentially due to CEO dismissal incentives.
Area of Science:
- Corporate Finance
- Environmental, Social, and Governance (ESG) Studies
- Information Disclosure
Background:
- Institutional investors play a significant role in corporate governance and decision-making.
- Climate change risk disclosure is increasingly important for stakeholders and regulatory bodies.
- Coordination among institutional blockholders can influence corporate disclosure practices.
Purpose of the Study:
- To examine the relationship between institutional blockholder coordination and climate change risk disclosure.
- To identify firm-specific characteristics that moderate this relationship.
- To explore the underlying mechanisms, such as CEO dismissal, linking coordination to disclosure.
Main Methods:
- Analysis of 2,887 firm-year observations for S&P 500 companies (2010-2022).
- Proxying institutional blockholder coordination using geographic proximity.
- Employing econometric models and robustness checks, including alternative disclosure measures and endogeneity tests.
Main Results:
- Increased institutional blockholder coordination is associated with decreased climate change risk disclosure.
- This negative association is more pronounced in firms with less diversified blockholders, concentrated ownership, and specific governance features.
- The effect is amplified in firms with corporate general counsels, non-concentrated customer bases, higher asset tangibility, and environmental sensitivity.
Conclusions:
- Institutional blockholder coordination can suppress climate change risk disclosure.
- Firm characteristics significantly influence the strength of this relationship.
- Performance-induced CEO dismissal emerges as a potential channel for this effect, impacting corporate transparency on climate risks.
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