The effect of carbon dissemination on cost of equity

TLDR

The study investigates whether firms can lower their cost of equity by widely sharing carbon information on Twitter. The authors constructed an iCarbon metric of Twitter carbon disclosures and analyzed 1,737 firm‑year observations from 584 NASDAQ firms between 2009 and 2015. Higher iCarbon scores are significantly linked to lower cost of equity, a relationship that persists after controlling for Bloomberg ESG disclosures and across alternative COE and iCarbon specifications.

Abstract

Abstract This study examines whether firms can influence their cost of equity (COE) by broadly disseminating their carbon information over Twitter. We study firms' dissemination decisions of carbon information by developing a comprehensive measure of carbon information that a firm makes on Twitter, referred to as iCarbon . Using a sample of 1,737 firm‐year observations for 584 nonfinancial firms with a Twitter account and listed on the U.S. NASDAQ stock exchange over the period 2009–2015, we find that iCarbon is significantly and negatively associated with COE. Our results are consistent after determining the effect of Bloomberg's environmental and environmental, social, and governance disclosure. The findings also hold when using alternative measures of COE and iCarbon .