Abstract

Research on environmental disclosure and performance implicitly assumes that coercive pressures from the government are consistent over time. Yet, polarised political debate over climate change may lead to the inconsistency and even backlash. This article investigates whether – under downshifting pressures from the government – firms can sustain their transparency and stewardship in response to climate change. We consider U.S. withdrawal from the Paris Agreement under Donald Trump’s administration as an exogenous policy shock, and study public firms’ changes in climate change disclosure and environmental performance in reaction. Using difference-in-differences analysis, we conclude that firms in carbon intensive industry had a worsened environmental performance, although there was no significant decrease in their climate change disclosure. This suggests on the one hand, firms’ climate change disclosure practices are primarily used for mitigating societal pressures rather than governmental pressures. On the other hand, an arbitrary withdrawal from the internationally agreed climate accord can be detrimental to deal with the current global climate emergency.

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