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Environmental transparency and investors' risk perception: Cross-country evidence on multinational corporations' sustainability practices and cost of equity
Business Strategy and the Environment ( IF 13.4 ) Pub Date : 2021-06-23 , DOI: 10.1002/bse.2852
Ellen Pei‐yi Yu 1 , Alessandra Tanda 2 , Bac Van Luu 3 , Dominic H. Chai 4
Affiliation  

We explore whether a greater amount of environmental disclosure can reduce a firm's ex ante cost of equity. This could occur because the quantity of environmental information changes investors' risk perception of the company, thereby influencing its ex ante cost of equity. Our study is a cross-country analysis of 1481 multinational corporations (MNCs) across 43 countries and territories from 2013 to 2019. Firstly, we measure investors' risk perception as a firm's ex ante cost of equity by employing five different valuation models, all based on equity analysts' forecasted data. We then investigate whether large quantities of environmental information disclosed by an MNC affect its ex ante cost of equity. We find evidence that investors price the amount of environmental disclosure. More environmental disclosure decreases a firm's ex ante cost of equity because it lessens investors' information asymmetry. However, this relationship is non-linear. Once the amount of environmental disclosure data exceeds a certain threshold level, a firm's ex ante cost of equity will rise again. Our empirical results also suggest that non-financial factors at the country level play a role in shaping how investors perceive a firm's riskiness. Locating the firm in a country with better environmental performance and a higher score of the human development index can reduce investors' risk perception and result in a lower ex ante cost of equity. A policy implication of our findings is that a global standardised and effective corporate sustainability reporting is needed to provide investors a more holistic view for evaluating the riskiness of their investments.

中文翻译:

环境透明度和投资者的风险认知:跨国公司可持续性实践和股权成本的跨国证据

我们探讨更多的环境披露是否可以降低公司的事前权益成本。这可能是因为环境信息的数量改变了投资者对公司的风险感知,从而影响了其事前权益成本。我们的研究是对 2013 年至 2019 年 43 个国家和地区的 1481 家跨国公司 (MNC) 的跨国分析。首先,我们通过采用五种不同的估值模型来衡量投资者的风险感知作为公司的事前股权成本股票分析师的预测数据。然后我们调查跨国公司披露的大量环境信息是否会影响其事前权益成本。我们发现有证据表明投资者对环境披露的数量进行定价。更多的环境信息披露降低了公司的事前股权成本,因为它减少了投资者的信息不对称。然而,这种关系是非线性的。一旦环境披露数据量超过一定的阈值水平,企业的事前权益成本就会再次上升。我们的实证结果还表明,国家层面的非财务因素在塑造投资者如何看待公司风险方面发挥着作用。将公司设在环境绩效更好、人类发展指数得分更高的国家,可以降低投资者的风险感知,并降低股本的事前成本。
更新日期:2021-06-23
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