Emissions, Liquidity, and Institutional Ownership

Adrian Finke, Julia Meyer, Martin Nerlinger, Ryan Riordan and Sebastian Utz
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Adrian Finke: University of Augsburg - Faculty of Business and Economics
Julia Meyer: ZHAW School of Management and Law; University of Zurich - Department of Banking and Finance
Martin Nerlinger: University of St. Gallen - School of Finance; Swiss Finance Institute
Ryan Riordan: Ludwig-Maximilians-University Munich, Faculty of Business Administration (Munich School of Management)
Sebastian Utz: University of Augsburg - Faculty of Business and Economics

No 26-39, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We examine how the introduction of standardized carbon emissions information affects equity-market liquidity and ownership. Using Trucost coverage data from 2010-2023 and a staggered difference-indifferences design, we find that first-time emissions information narrows bid-ask spreads by 2%, reduces Amihud illiquidity by 4%, and increases dollar trading volume and turnover by 4%. Institutional ownership increases by approximately 0.3 percentage points, representing roughly $30 billion in capital reallocated to newly covered firms. This ownership shift partially explains the liquidity improvement: a one-percentage-point increase in institutional ownership is associated with an additional 0.2% reduction in spreads. Liquidity gains are strongest for high-emission firms and late disclosers. Our results indicate that non-financial information, when standardized and comparable, is financially consequential: it attracts institutional capital, reduces adverse-selection costs, and enhances market efficiency.

Keywords: Liquidity; Institutional Ownership; Carbon Emissions; Disclosure (search for similar items in EconPapers)
JEL-codes: G12 G14 G23 Q54 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2026-05
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