Climate risks disclosure and firm value. The role of analysts
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Global climate change has a significant impact on business operations and companies’ financial performance. This arouses the great interest of various market participants in the climate risks-related information. The present thesis examines the association between firm value and firms’ exposure to physical risks caused by climate change and the role of financial analysts in this relationship. The voluntary nature of disclosure of physical risks exposure might lead to self-selection bias. This research adopts an exploratory approach that allows to correct for self-selection bias and to examine the mediating role of financial analysts in the relationship between firm value and firms’ exposure to physical risks. Based on a 2011 to 2013 sample of 750 European listed companies, this study finds that capital markets only incorporate information on company’s decision to voluntary disclose physical risks exposure into the firm valuation process, while the level of exposure to physical risks is neglected. Moreover, this study confirms the mediating role of financial analysts in the relationship between disclosure of physical risks exposure and firm value. The findings indicate that the act of disclosure of physical risks exposure downgrades analysts’ recommendations by 0.041 points, what transfers into firm value increase of 11,9%.
Faculteit der Managementwetenschappen