University of Oulu

Firm-value effects of carbon emissions and carbon disclosures : evidence from Finland

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Organizations: 1University of Oulu, Oulu Business School, Department of Accounting, Accounting
Format: ebook
Version: published version
Access: open
Online Access: PDF Full Text (PDF, 1.1 MB)
Pages: 66
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Language: English
Published: Oulu : O. OLAWALE, 2023
Publish Date: 2023-06-14
Thesis type: Master's thesis
Tutor: Middleton, Alexandra
Breukers, Leonard
Reviewer: Middleton, Alexandra
Breukers, Leonard


The discussion of the relationship between corporate performance and environmental performance has been ongoing for a very long time with a view to find a balance between what should be the objectives of the firm that guarantees both viability and sustainability. One such discussions has been the effect of carbon emission on the value of the firm. A long held position has been that the cost of reducing carbon emission tend to affect the profitability of a firm hence having a negative effect on the value of the firm however in the last two decades, and with the agreement of various governments and institutions on the need to reduce the global carbon footprint, it is beginning to appear that any effort to reduce carbon emissions by any firm is viewed favorably by the capital markets hence increasing the value of the firm

However, the challenge that gave rise to this study emanated from the conflicting results across different jurisdictions as to whether the favourable perception of the reduction of carbon emission is dependent on certain characteristics of a particular jurisdiction. Studies in United States and Shanghai finds that the market impose penalties on the value of any firm with carbon emissions while Korea, Indonesia and Taiwan reward the value of the firm with carbon emissions. We therefore look to Finland — a country that has committed to achieve carbon neutrality by 2035 whether the market rewards or penalizes firms with carbon emissions.

The study was based on secondary data, specifically financial statement figures from 2019 to 2021-a period of three years-. The study also adopted an expo-facto research design to analyze 50 companies from Refinitiv database. The secondary data from the Carbon Disclosure Project (CDP) database. The research methodology adopted mixed methods research design. The panel data regression model considers robust estimates, including the pooled Ordinary Least Square (OLS) or fixed effects and random effects models.

Here we show that the carbon emission and carbon disclosure have a positive but insignificant effect on the value of the firms in Finland.

The study found that there exists an insignificant positive effect of carbon emission disclosure on firm value. With every thousand metric tonnes increase in carbon emission, firm value will increase by €3,833 (which appears very low), and the Pearson correlation coefficient also shows a very low positive relationship between the firm value and carbon emission.

The implication of this study therefore is that policy makers need to introduce an incentive scheme that is driven by regulators and encompasses all the firms both private and public, in order to reward the firms who are actively reducing their carbon footprints as well as those who are voluntarily disclosing their carbon emissions numbers especially as the country has a carbon-neutral target to achieve by 2035. The scheme should also be effective enough in penalizing any firm that does not actively seek the reduction of carbon emissions.

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