McGill University, Canada

An organizational institutionalist perspective on the response of capital markets to climate risk disclosures

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Abstract

In this paper, I use the theoretical framework of organizational institutionalism to investigate whether capital markets respond to climate risk disclosures. The issue of climate change poses radical uncertainty and complexity to firms through institutional pressures, prompting some firms to respond by disclosing how climate risks are affecting their businesses. I hypothesize that investors, who are driven to reduce uncertainties and complexities in their investments, confer legitimacy to firms that are proactive in disclosing how they are managing such environments. As a result, are more likely to provide financial resources to those firms. Despite prior empirical research that demonstrated neutral or contradictory findings on the impact of climate related disclosures on financial performance, my preliminary analysis confirms that climate risk disclosures are in fact associated with lower capital constraints. These results contribute to the literature on carbon disclosures by shedding light on the link between disclosures and access to finance.

Biography

Amir Nosrat is a doctoral candidate at McGill University’s Faculty of Management. His research looks into the various ways in which the issue of climate change has come to affect firm-level outcomes, specifically environmental and economic performance. Amir conducts his research using theoretical concepts from organizational institutionalism, sociocultural perspectives on risk, and discursive theories of organizations. Prior to being a PhD student, Amir worked as a mechanical engineer helping electrical and gas utilities to devise and implement energy efficiency and carbon reduction programs.