Corporate disclosure of CO₂ embedded in oil and gas reserves: stock market assessment in a context of global warming Available to Purchase

The authors assess the informativeness for stock markets of proven reserves of oil and gas, and embedded CO₂ in those reserves.

Based on a two-step regression approach, the authors attempt to test the relationship between proven reserves, CO₂ embedded in those reserves and the stock market value controlling for the selection bias (i.e. the decision of managers to disclose environmental information about embedded CO₂).

Results, based on a sample of the US and Canadian firms are the following. Proven reserves increase the firm’s value, while embedded CO₂ reduces the stock market value substantially. Furthermore, the decision of managers to disclose information about embedded CO₂ is positively related to analyst following, share price volatility, firm size, and institutional ownership.

The current study assesses the long-term incidence of embedded CO₂ (in oil and gas proven reserves) on firms’ stock market value, while most studies are focusing on yearly CO₂ emissions.