Stock Market Reaction to Mandatory Carbon Disclosure Announcements: The Role of Institutional Investors

Chris Florackis, Dewan Muktadir-Al-Mukit, Sushil Sainani and John Ziyang Zhang
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Chris Florackis: University of Liverpool
Dewan Muktadir-Al-Mukit: Sheffield Hallam University
Sushil Sainani: University of Liverpool
John Ziyang Zhang: Audencia Business School

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Abstract: We examine the stock market reaction to mandatory carbon disclosure (MCD) announcements in the UK, the first country to mandate the disclosure of greenhouse gas (GHG) emissions by listed firms. Our analysis reveals that, while the overall market was not greatly affected, firms with high carbon intensity and substantial institutional ownership experienced negative abnormal stock returns. This effect persists-and even becomes more pronounced-for firms owned by long-term institutional investors and those from countries with strong social norms surrounding climate and sustainability. Additionally, we find that heightened institutional investor attention on announcement days amplified price pressure, leading to more negative stock returns for these firms. Collectively, our findings underscore how mandatory carbon disclosure announcements enhanced the salience of carbon information, prompting institutional investors to incorporate carbon-related considerations into their decision-making processes.

Keywords: JEL classification: G14 G32 G38 Q51 Q54 Mandatory carbon reporting regulations Carbon performance Stock market reaction Institutional investors; JEL classification: G14; G32; G38; Q51; Q54 Mandatory carbon reporting regulations; Carbon performance; Stock market reaction; Institutional investors; Mandatory carbon reporting regulations (search for similar items in EconPapers)
Date: 2025-03
Note: View the original document on HAL open archive server: https://hal.science/hal-04979126v1
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Published in Journal of International Financial Markets, Institutions and Money, 2025, 99 (1), pp.102113. ⟨10.1016/j.intfin.2025.102113⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04979126

DOI: 10.1016/j.intfin.2025.102113

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