Market Responses to Firms’ Voluntary Climate Change Information Disclosure and Carbon Communication Su-Yol Lee, 1 * Yun-Seon Park 1 and Robert D. Klassen 2 1 Chonnam National University - College of Business Administration, Gwangju, Korea, Republic of 2 The University of Western Ontario - Ivey School of Business, London, Ontario Canada ABSTRACT Despite the importance of the Carbon Disclosure Project (CDP), the question of how firms’ voluntary carbon disclosure influences capital markets and shareholder value remains unanswered. Using the event study methodology with a sample of firms from the CDP Korea 2008 and 2009, this paper investigates market responses to firms’ voluntary carbon information disclosure. The results suggest that the market is likely to respond negatively to firms’ carbon disclosure, implying that investors tend to perceive carbon disclosure as bad news and thus are concerned about potential costs facing firms for addressing global warming. In addition, the study examines the moderating effect of frequent carbon commu- nication on the relationship between carbon disclosure and shareholder value. The results suggest that a firm can mitigate negative market shocks from its carbon disclosure by releasing its carbon news periodically through the media in advance of its carbon disclosure. Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment. Received 7 July 2012; revised 6 November 2012; accepted 23 November 2012 Keywords: climate change; voluntary disclosure; capital market; Carbon Disclosure Project; stakeholder management; event study Introduction F IRMS HAVE STARTED TO CONSIDER THE ISSUE OF GLOBAL WARMING AS PART OF THEIR STRATEGIC MANAGEMENT SINCE climate change emerged as one of the most important business concerns in the past decade (Lash and Wellington, 2007; Kolk and Pinkse, 2005). The Kyoto Protocol, adopted in 1997 and entered into force in 2005, has served as a main driver of changes in corporate responses to global warming. Recently, firms have been increasingly asked to provide more information on their climate change strategies and plans for managing and reducing carbon emissions. For instance, since 2002, the Carbon Disclosure Project (CDP), a consortium of over 300 institutional investors with $41 trillion in assets, has asked the world’s 500 largest firms every year to disclose their greenhouse gas (GHG) emissions, risks, opportunities, and management strategies. The equity market has started to recognize the magnitude of the impact that the transition to a low-carbon global economy is expected to have on firms’ competitiveness and long-term valuation (Goldman Sachs Sustain, 2009). *Correspondence to: Su-Yol Lee, Chonnam National University - College of Business Administration, 300 Yongbong-dong, Buk-gu, Gwangju Metropolitan City 500-757, Republic of Korea. E-mail: leesuyol@chonnam.ac.kr Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment Corporate Social Responsibility and Environmental Management Corp. Soc. Responsib. Environ. Mgmt. 22,1–12 2015 Published online 26 February 2013 in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/csr.1321