Board Effectiveness and the Voluntary Disclosure of Climate Change Information

TLDR

The study investigates how board effectiveness influences firms’ voluntary climate change disclosures. The authors link board effectiveness to firms’ choice to complete the Carbon Disclosure Project questionnaire and to the quality of climate‑risk and mitigation disclosures. Results reveal a positive link between board effectiveness and both the likelihood of answering the CDP questionnaire and the quality of climate‑risk disclosures, underscoring the board’s role in enhancing transparency. © 2014 John Wiley & Sons, Ltd and ERP Environment.

Abstract

Abstract This paper examines the relationship between board of directors' effectiveness and voluntary climate change disclosures. Since risk management and reporting fall under the board's responsibility, we relate board effectiveness to the firm's decision to voluntarily respond to the Carbon Disclosure Project (CDP) annual questionnaire as well as the quality of disclosures about climate‐change‐related risks and strategies to mitigate them. Our results show a positive association between board effectiveness and the firm's decision to answer the CDP questionnaire as well as its carbon disclosure quality. The paper contributes to the ongoing debate on the determinants of voluntary climate change disclosures. Our findings highlight the importance of the board of directors' role in enhancing the transparency and relevance of voluntary disclosures of climate change business impacts. Copyright © 2014 John Wiley & Sons, Ltd and ERP Environment