Carbon emission and firms’ value: Evidence from Europe

Salvatore Perdichizzi, Bruno Buchetti, Antonella Francesca Cicchiello and Lorenzo Dal Maso

Energy Economics, 2024, vol. 131, issue C

Abstract: Amidst the growing global concern about climate change, societies have taken increased interest in corporations’ output of greenhouse gas emissions, primarily CO2. Our study examines the direct and indirect effect of carbon emissions on firm value. We document that, in the European context, corporate carbon emissions are negatively associated with a company’s market valuation. Moreover, we find that CO2 emissions reduce the relevance of earnings (i.e., for high-polluting firms, earnings are less relevant for market valuation). Additionally, we show that the results are driven by Scope 1 emissions, not by Scopes 2 and 3. Finally, we establish that the country-level formal and informal institutions shape these effects.

Keywords: Carbon emission; Carbon intensity; Value relevance; Market value; Formal and Informal institutions (search for similar items in EconPapers)
JEL-codes: C32 E52 E58 G21 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:131:y:2024:i:c:s014098832400032x

DOI: 10.1016/j.eneco.2024.107324

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