The revisited contribution of environmental reporting to investors' valuation of a firm's earnings: An international perspective

This paper investigates the impact of environmental reporting on the relationship between a firm's earnings and its stock market value. Our measure of environmental reporting comprises only information that is voluntarily disclosed by firms and which meaning implies specific initiatives or events. To assess how country-specific contexts may affect the impact of environmental reporting, we focus on firms from Canada, France and Germany; three countries that employ different reporting and governance regimes. Our design relies on simultaneous equations to control for the endogeneity between environmental reporting and firm attributes such as size, age of assets, industry membership and public media exposure. Results suggest that decisions to report environmental information have a moderating impact on the stock market valuation of a German firm's earnings. In contrast, environmental reporting does not significantly influence the stock market valuation of Canadian and French firms earnings. Overall, results indicate that in assessing how information released by a firm affects the stock market valuation of its earnings, it is important to control for the endogeneity between a firm's decision to disclose information, its exposure to media and its stock market value.