Impact of environmental disclosures on the stock market Role and impact of financial analyst intermediation PhD supervisors Professor Pascal Dumontier Professor Gilles Guieu Béatrice BOYER-ALLIROL 8th Annual Graduate Student Conference

 Research project  Subject interest  Problematic  Project outline  Empirical studies  Contributions 2 Presentation plan

Corporate disclosures Financial and non financial Addressed to stakeholders for valuation and decision making Problem: harmonizing stakeholder expectations and information provided by companies Mandatory or voluntary disclosures 3 ProjectSubjectProblematicOutlineStudies Research project Contributions

Research project Environmental disclosures Non financial disclosures – less regulated « Elements of information which relate to the management of the past, current and future environmental activities of the firm as well as to its performance » (Berthelot, Cormier and Magnan, 2003) Corporate environmental responsibility  component of the CSR Main communication supports: annual, environmental reports and sustainability reports Communication directed at investors 4 ProjectSubjectProblematicOutlineStudiesContributions

 Economic  Disclosure impact on stock markets  Increase of environmental disclosures  Evolution of environmental regulation  Academic  Environmental disclosure determinants (Bewley and Li, 2001; Cormier and Magnan, 2003)  Environmental performance (Hughes et al., 2004; Van Staden and Hooks, 2007)  Market reactions to environmental disclosures (Clarkson et al., 2010; Jacobs et al., 2010) 5 Subject interest ProjectSubjectProblematicOutlineStudiesContributions

 What are the financial consequences of environmental disclosures, conditional on the role played by financial analysts ? 6 Environmental disclosures Cost of capital Information asymmetry Financial & CSR analysts Problematic Stake holders Environmental regulation ProjectSubjectProblematicOutlineStudiesContributions

 3 empirical studies  Study n°1: Analysis comparing ED characteristics of ED between firms subject to different national legislation  Study n°2: Impact of ED on information asymmetry and cost of capital  Study n°3: Role of financial analysts in information asymmetry and the relation between cost of capital and ED 7 Project outline ProjectSubjectProblematicOutlineStudiesContributions

 Problematic: Are environmental reporting regulations useful?  Hypotheses  H1: ED characteristics are different depending upon national regulations  H2: ED quality is better when regulations are tighter  H3: ED volume is higher when regulations are tighter 8 First empirical study ProjectSubjectProblematicOutlineStudiesContributions

 Analysis of environmental reporting regulations of roughly 15 European countries  Constitution of European countries groups  Inventory of concerned, environmentally sensitive firms  Random selection of concerned companies sample  Analysis of a sample of concerned firms ED  ED scoring grid  Cross-sectional and temporal studies 9 First empirical study : methodology ProjectSubjectProblematicOutlineStudiesContributions

 Problematic: What are the financial consequences of ED for companies?  Hypotheses:  H1: A negative relation exists between ED volume / quality and information asymmetry  H2: A negative relation exists between ED volume / quality and cost of capital 10 Second empirical study ProjectSubjectProblematicOutlineStudiesContributions

 Problematic: Are financial consequences of ED conditioned by an intermediary role played by financial analyst information?  Hypotheses:  H1: Financial analysts consider ED in their decisions to follow a company and in their forecasts and recommendations  H2: Environmental notations impact financial analysts’ forecasts and recommendations 11 Third empirical study ProjectSubjectProblematicOutlineStudiesContributions

 Inventory of European environmental reporting regulation  Score measure of environmental disclosures  Financial consequences of ED  Financial analysts’ role in environmental information treatment 12 Contributions ProjectSubjectProblematicOutlineStudiesContributions

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