Climate Risk Disclosure and Pricing Efficiency: A Textual Analysis

Fan Hu, Yaoyao Wu, Fuyu Liu and Xin Xu

Emerging Markets Finance and Trade, 2025, vol. 61, issue 14, 4384-4398

Abstract: Using annual report disclosure data from Chinese A-share listed firms between 2010 and 2023, we apply textual analysis to develop a measure of climate risk disclosure. The empirical results indicate that climate risk disclosures significantly enhance stock pricing efficiency. Specifically, disclosures of chronic and transition risks significantly improve pricing efficiency, while disclosures of acute risks have little effect. Climate risk disclosure enhances stock pricing efficiency by alleviating information asymmetry, thus reducing investor expectation stickiness. Furthermore, the positive effect of climate risk disclosures on pricing efficiency is more pronounced for non-heavily polluting firms, inland firms, and those in disaster-prone regions.

Date: 2025
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DOI: 10.1080/1540496X.2025.2513347

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