Abstract

Since 2011, major companies in South Korea have been disclosing their carbon emissions. Prior studies indicates that carbon emission disclosure negatively affects firm value, Tobin Q. This study aims to verify whether the impact of corporate carbon emission disclosure on firm value varies depending on profitability. The study examined domestic listed companies from 2000 to 2022. We investigate the impact of carbon emission disclosure since 2011 on firm value using Return on Assets (ROA) as a mediator. Empirical results suggest that carbon emission disclosure reduces firm value. However, higher profitability is associated with a positive influence on firm value. Specifically, carbon emission disclosure is enhancing firm value only in the top 5% of companies in terms of profitability. Furthermore, these results are unrelated to ESG scores. Instead, they prominently emerge when companies possess a high E score, indicating strong environmental performance, or when their cash holdings are substantial compared to revenue or expected carbon tax payments. The findings of this study highlight that the introduction of carbon taxes or carbon emission disclosure can be positive for firm value if companies have prepared financial capabilities as profitability or cash reserves. Conversely, when such conditions are not met, these initiatives can reduce firm value. Consequently, it suggests that a gradual implementation, considering the company’s conditions, might be necessary during the policy－making process.

Keywords

• Carbon emission disclosure
• Firm value
• ROA
• Cash reserve

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