Abstract
We examine the association between carbon emissions, carbon disclosures, and firm value for Korean firms, with a particular interest in chaebols, a special type of Korean conglomerate. Using hand-collected carbon emissions and firm-specific data for 841 Korean firms, including 514 chaebols and 335 non-chaebols, we find a significantly positive relationship between carbon emissions and firm value among chaebol affiliates. This result contrasts with previous findings conducted in advanced markets, where investors consider carbon emissions to be destructive. In terms of the voluntary disclosure policy, we find that companies with good environmental performance tend to disclose carbon emissions voluntarily. We further argue that these findings originate from the specific business atmosphere in Korea. Our results support the traditional view of corporations in terms of environmental policy and highlight the importance of firm characteristics and historical developments in the analysis of environmental policy.
Highlights
Emissions and CarbonFriedman argues that firms should focus on maximizing profits for shareholders, who privately donate their wealth to the causes of their choice [1]
We focus on the relationship between carbon emissions, their disclosures, and firm value for chaebols, which are a special type of Korean conglomerate
To test the effect of carbon emission on firm value, we apply the empirical model in H-1 to the estimation
Summary
Friedman argues that firms should focus on maximizing profits for shareholders, who privately donate their wealth to the causes of their choice [1]. As investors pay more attention to the profitability aspect of chaebol affiliates, compared to non-chaebol affiliates, this positive relationship is probably more significant for the former group of corporations Such value irrelevance or value-enhancing aspects may naturally predict a greater inclination of carbon disclosure among firms with good environmental performance in the Korean financial market. A higher level of carbon emissions indicates a greater operating performance, and investors may value such large cash flow generation This tendency is closely associated with the historical development of the Korean financial market [8]. Investors in the Korean market value the cash flow generation aspect more highly among chaebol-affiliated corporations compared to non-chaebol ones; this leads to a positive valuation effect of carbon emissions, only within chaebol affiliates.
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