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Carbon performance and disclosure: A systematic review of governance-related

determinants and financial consequences

Patrick Velte, Martin Stawinoga, Rainer Lueg

PII: S0959-6526(20)30110-4
DOI: https://doi.org/10.1016/j.jclepro.2020.120063
Reference: JCLP 120063

To appear in: Journal of Cleaner Production

Received Date: 21 July 2019

Revised Date: 6 January 2020
Accepted Date: 7 January 2020

Please cite this article as: Velte P, Stawinoga M, Lueg R, Carbon performance and disclosure: A
systematic review of governance-related determinants and financial consequences, Journal of Cleaner
Production (2020), doi: https://doi.org/10.1016/j.jclepro.2020.120063.

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 Carbon performance and disclosure: A systematic review of governance-
related determinants and financial consequences

Authors

Patrick Velte

Leuphana University Lueneburg, Faculty of Business and Economics, Institute of

Management, Accounting & Finance (IMAF), Professor of Accounting, Auditing &
Corporate Governance, Patrick.velte@leuphana.de, Universitaetsallee 1, 21335 Lueneburg,
Germany

Martin Stawinoga

OWL University of Applied Sciences and Arts, Business Administration and Economics,
Professor of Accounting, martin.stawinoga@th-owl.de, Campusallee 12, 32657 Lemgo,
Germany

Rainer Lueg

University of Southern Denmark, Department of Business and Economics, Universitetsparken

1, 6000 Kolding, Denmark

Leuphana University Lueneburg, Faculty of Business and Economics, Institute of

Management, Accounting & Finance (IMAF), Rainer.Lueg@leuphana.de, Universitaetsallee
1, 21335 Lueneburg, Germany
 1

Carbon performance and disclosure: A systematic review of governance-

related determinants and financial consequences

Abstract

The purpose of this paper is to convey a thorough understanding of the governance-related

determinants and financial consequences of carbon performance and disclosure. Its
motivation lies in the increasing global political, social, academic as well as practical
importance of managing and reporting on carbon-related issues. Methodologically, we
employ a systematic literature review. Thus, we identify 73 quantitative peer-reviewed
empirical studies in this field and categorize them according to a legitimacy-theory-based
framework. Our four main contributions offer new insights into this emerging research field
and provide guidance for the development of new research models: First, we help future
researchers to structure this emerging field of research with respect to the interactions of the
phenomenon itself (carbon performance vs. disclosure), its determinants (country- and firm-
related governance), and its financial consequences (value relevance, information asymmetry,
financial performance, and cost of capital). Second, we provide a comprehensive overview of
variables and proxies used in the studies and list their main statistical effects, which facilitates
building novel models. There are indications that 1) board composition positively influences
both carbon performance and disclosure, 2) carbon performance and carbon disclosure are
positively connected, 3) carbon disclosure reduces information asymmetry, and 4) carbon
performance increases financial performance. Third, we develop a research agenda with
concise suggestions for future studies. Fourth, we argue that due to the under-theorization of
concepts the comparability of included studies is challenging, this research field may be
characterized as a vibrant field for extensive future research.

JEL classification: M41; M48; Q3; Q56.

Keywords: Carbon performance; carbon disclosure; corporate governance; management
control; financial performance; legitimacy theory.
 2

1 Introduction

Over the past two decades, misleading or fraudulent disclosure practices have substantially
damaged stakeholder trust in public firms. Prominent examples include the financial fraud by
Enron or the recent environmental scandal in the automotive industry (the so-called
“Dieselgate”) (Brand, 2016). Stakeholders were ill-informed about controversial management
strategies and deplored the information gap between themselves and the firms’ boards
(regarding corporate social responsibility (CSR) information) (Morsing and Schultz, 2006).
Disappointed stakeholders can negatively affect the valuation of a firm, as argued by the
proponents of the business case for sustainability (the pertinent, seminal literature providing a
profound discussion includes Dyllick and Hockerts, 2002; Margolis and Walsh, 2003; Carroll
and Shabana, 2010; and Hockerts, 2015). The business case argument of sustainability is that
stakeholders influence financial outcomes through increasing regulation, withholding
legitimacy, or stalling business transactions (Busch and Lewandowski, 2018). For their own
benefit, equity-incentivized executives and shareholders both try to avoid such sanctions from
stakeholders (Dyllick and Hockerts, 2002; Margolis and Walsh, 2003; Carroll and Shabana,
2010; Hockerts, 2015). CSR disclosure providing decision usefulness is a mutually preferred
remedy to close information gaps (O’Dwyer et al., 2005).

Carbon performance and disclosure as climate change management tools take a prominent
place in modern stakeholder relations. As a general definition, carbon performance describes
the quantitative emissions of climate-changing greenhouse gases as well as measures and
processes for emission reduction from the air (Hoffmann and Busch, 2008). Carbon emissions
play a major role in macro settings, such as global warming and climate change. Dynamic
business models and carbon-negative corporations represent a new type of management
thinking, seeing business as part of society (Marousek et al., 2019). New technologies of
biochar and carbon sequestration (Mardoyan and Braun, 2015; Spokas et al., 2011; Smith,
2016; Marousek et al., 2014; 2018) have been established to strengthen the United Nations
(UN) Sustainable Development Goals and the Paris Agreement. Many of the 17 goals of the
UN address climate change policy (e.g., Goal 6: Clean water and sanitation or Goal 7:
Affordable and clean energy). The key aim of the Paris Agreement 2016 is to increase the
global response to the threat of climate change by keeping a global temperature rise this
century well below two degrees Celsius above pre-industrial levels and to pursue efforts to
limit the temperature increase even further to 1.5 degrees Celsius (Rogelj et al., 2016). At the
meso-level, carbon emissions have a verifiable inverse effect on financial performance (Busch
et al., 2018; Grauel and Gotthardt, 2016). Specifically, recent emissions scandals like the
 3

Volkswagen (VW) scandal have resulted in litigation risk and the loss of customers and
reputation (Rhodes, 2016). Next to carbon performance, carbon disclosure is linked to internal
and external stakeholders as a regular information instrument and includes information about
carbon performance, strategies, and outlooks. Normally, carbon disclosure is part of an
environmental or CSR report (Depoers et al., 2016). Carbon disclosure can be mandatory by
locally confined regulation (Johansen, 2016). Yet, it is mostly voluntary. For instance, firms
that participate in the Carbon Disclosure Project (CDP) and decide to disclose key
information about their carbon performanceand other carbon-related issues adhere to the
guidelines and standards of the Global Reporting Initiative (GRI), the Sustainability
Accounting Standards Board (SASB), and/or the Climate Disclosure Standards Board (CSB).
The global Task Force on Climate-Related Financial Disclosures (2017) updated its 2017
recommendations on climate-related financial disclosure in 2019 (Task Force on Climate-
Related Financial Disclosures, 2019). The aim was to combine carbon disclosure and
financial (risk) disclosure. Paralleling its emerging relevance in practice, research on carbon
performance and disclosure has been on the rise for over a decade (Hahn et al., 2015).

Despite the fact that carbon performance and disclosure are of elevated relevance for research,
practice, and regulatory initiatives, we still lack a systematic understanding of their practical
application, governance-related determinants, and financial consequences at the firm level.
Prior research designs and results are rather complex and heterogeneous, underlying the
ambiguity of the role of governance-related variables on carbon performance and disclosure
and their financial consequences. Moreover, many research papers do not differentiate strictly
between carbon performance and carbon disclosure. This suggests the need for a systematic
review of quantitative empirical research on carbon performance and disclosure published in
peer-reviewed academic journals. Existing reviews predominantly address global phenomena:
the early, narrative review of Milne and Grubnic (2011) did not have much empirical
evidence to work with, since the research field had just emerged at the time. Stechemesser and
Guenther (2012) investigated the management accounting implications of carbon disclosure
as opposed to external disclosure. Ascui (2014) reviewed social and environmental
accounting journals with a general perspective on carbon disclosure, carbon accounting
education, and carbon management and financial disclosure. Like Hahn et al. (2015), these
reviews did not specifically deal with the impact of governance on carbon disclosure and its
financial consequences, even though this relationship builds on the theoretical core argument
for voluntary carbon disclosure. Our review should close this highly relevant gap. We pose
the following three main research questions:
 4

1) What are the key governance-related determinants (including moderators and

mediators) of carbon performance and disclosure?

2) What are the key financial consequences for firms (including moderators and
mediators) of carbon performance and disclosure?

3) What is the connection between carbon performance and carbon disclosure?

Our methodological approach is a systematic literature review: first, we scan the fields of
finance, accounting, management, and sustainability in a reproducible manner. This lowers
the probability of missing important studies. Second, we explain to the reader which kinds of
sources we exclude. This simplifies future updates of our review. Third, we ensure an
unbiased inclusion of contested findings. This helps the reader to get a better understanding of
ambiguities in this field. With this type of systematic review, we aim to create new
knowledge about our specific topic using existing empirical-quantitative research from the
field.

Our findings suggest that governance determinants can be divided into firm-related and
country-related governance variables (we use the term determinants when referring to our
own framework and analysis. We use the term variable when referring to the statistics of the
studies we review). Firm-related governance determinants include 1) board composition, 2)
ownership structure, and 3) stakeholder pressure. Country-related governance determinants
vary strongly along the country-related lines of 1) case versus code law regimes, 2) the degree
of legal enforcement, and 3) the level of shareholder rights (investor protection). In general,
board composition that leads to increased board effectiveness is linked with better carbon
performance and disclosure. Moreover, we find that most studies confirm a positive
relationship between carbon performance and carbon disclosure. Furthermore, we find that
carbon performance affects financial consequences as a whole (e.g., financial performance
and the risk-specific cost of capital). The included studies illustrate that carbon disclosure
reduces information asymmetry and that carbon performance increases financial performance.
Based on these findings, we make four contributions:

1. Structuring of the research field

2. Documentation of statistical evidence
3. Development of a research agenda (what could be investigated), and in the course of
this, we simultaneously…
4. …theorize the field more profoundly (how it could be investigated).
 5

Overall, our literature review extends and complements our current body of knowledge on
carbon-related empirical research (Ascui, 2014; Hahn et al., 2015; Milne and Grubnic, 2011;
Stechemesser and Guenther, 2012).

2 Conceptual background and development of research framework

This section defines the terms relevant for this review and discusses the use of legitimacy
theory as a basis for the framework that guides our review on carbon disclosure.

2.1 General issues in carbon-related research

Carbon-related research suffers from the same two issues as non-financial disclosure in
general. First, measurement of carbon performance as well as the disclosure of a carbon-
related report are still voluntary in most international settings. This impairs the reliability and
validity of the carbon-related constructs used in research (Gray, 2006; Michelon et al., 2015).
This lack of harmonization also leads to incomparable disclosure levels that can range from
too low information density to information overload (KPMG, 2017; Tschopp and Huefner,
2015). Second, legitimacy theory conjectures that some firms engage in greenwashing and
information overload practices (Mahoney et al., 2013) by using isolated positive carbon-
related disclosure to misrepresent their lack of carbon performance (Lyon and Maxwell,
2011). Since legitimacy theory also stresses the risk of a symbolic use of carbon disclosure,
we base our review framework on this theory.

2.2 Legitimacy theory as the prevailing lens

Researchers rely on distinct theories to describe the phenomenon of carbon performance and
disclosure (Hahn et al., 2015). Yet, legitimacy theory (Dowling and Pfeffer, 1975) is the
prevailing theoretical lens (Ascui, 2014). We discuss three areas of carbon performance and
disclosure with respect to legitimacy theory: the phenomenon itself, its governance-related
determinants, and its financial consequences.

2.2.1 The link between carbon performance and carbon disclosure and vice versa

Carbon performance is the result of managerial activity that deals with carbon emissions. It
describes the quantitative emissions of climate-changing greenhouse gases as well as
measures and processes for emission reduction from the air. The constructs manifest in, for
example, carbon intensity (static and physical units), carbon exposure (static and monetary
units), carbon dependency (dynamic and physical units), or carbon risk (dynamic and
monetary units) (Hoffmann and Busch, 2008). Busch and Lewandowski (2018) suggest
 6

measuring the construct as carbon emissions of scopes 1 (direct), 2 (indirect), and 3 (along the
supply chain).

Carbon disclosure reports historic and prospective carbon performance to internal and
external stakeholders as well as other climate-related information; for instance, qualitative
information about outlook or strategy (Pitrakkos and Maroun, 2019). Carbon disclosure can
be voluntary (such as the Green House Gas [GHG] protocol and the CDP) or mandatory (such
as the EU’s Emissions Trading Scheme [ETS], Japan’s GHG system, and Emissions &
Generation Resource Integrated Database [eGRID]). Carbon information in this context is
regularly disclosed periodically as part of a CSR report.

Carbon disclosure and performance are related to each other. Firms tend to report their
achieved carbon performance on a voluntary basis in contexts where stakeholders expect such
reporting activities (Deegan, 2002). As carbon-related activities have gained relevance in
society (especially in environmentally sensitive industries), carbon disclosure constitutes the
communication channel that enhances the legitimacy of a firm from the perspective of society
(Deegan, 2002). In the other direction, the stakeholders’ expectation to observe disclosure
may initiate enhanced carbon-related performance (Qian and Schaltegger, 2017). Yet, higher
carbon expectations toward a firm could also trigger shallow greenwashing activities as an
attempt to create a positive image and gain legitimacy, even if the firm only engages in few
carbon-related activities (Mahoney et al., 2013). Nevertheless, greenwashing activities may
create legitimacy for firms with poor carbon performance (Cho et al., 2012), which makes
them indistinguishable from firms with good performance. The link could also disappear if a
sample contains too many unidentified greenwashing firms that confound the generally
positive link (Qian and Schaltegger, 2017).

Therefore, we assume that carbon disclosure and carbon performance should generally exhibit
a positive link. If a firm has achieved a high level of carbon-related performance, we expect
this firm to be more willing to report these practices on a voluntary basis, either in a CSR
report or in an integrated report, to gain legitimacy for its carbon-related performance.
Further, we assume that firms displaying high carbon performance will publish carbon-related
disclosure of a higher quality compared to firms showing lower carbon-related performance,
as greenwashing practices are of less importance in this case. Furthermore, we assume that if
the quality of a firm’s carbon disclosure is high, it will have positive effects on carbon
performance in the long run. The firm receives critical feedback from its shareholders and
 7

other stakeholders on its disclosed carbon parameters, and this may act as an instrument to
further improve the carbon-related activities.

2.2.2 The impact of governance on carbon performance and disclosure

Legitimacy theory suggests that firms adjust their business activities to enhance their carbon
performance and share this with their stakeholders through disclosure (Chu et al., 2013).
Furthermore, the regulatory environment can mainly influence managers’ decisions on carbon
performance and disclosure. Firm- and country-related governance are dominant determinants
of this in the contemporary literature.

Firm-related determinants represent corporate governance mechanisms that should improve

carbon performance and disclosure (Kilic and Kuzey, 2019). These mechanisms aim at
enhancing the legitimacy of a firm toward (non-)shareholding stakeholders (Suchman, 1995)
and respond to social expectations regarding climate change policies (Jaggi et al., 2018).
Firm-related determinants manifest in unbiased

1) board composition (esp. diversity),

2) ownership structure with a high share of sustainable, institutional investors (Barroso
Casado et al., 2015), and
3) stakeholder pressure (esp. media coverage).

Again, it stands to reason that a context with powerful (non-)shareholding stakeholders should
foster high carbon performance and disclosure compared to a context in which shareholders
and stakeholders are almost powerless against corporatist boards.

Country-related determinants evolve through public awareness of carbon emissions and

government aims to reduce those emissions. They manifest in
1) the existence of a case law regime (indicating a prevalence of shareholder-oriented
governance over corporatism),
2) the strength of legal enforcement (indicating the power of claims from stakeholders
and shareholders against firms), and
3) the degree of shareholder rights (indicating the power of shareholder claims against
the board and increased investor protection).

It stands to reason that a pro (non-)shareholding stakeholder environment should expose a

high level of carbon performance and disclosure compared to a context that favors
corporatism and strong boards.
 8

Thus, it can be assumed that firm- and country-related governance parameters positively
affect carbon performance as well as carbon-related disclosure. First, firm-related governance
aspects may enhance the carbon performance and carbon disclosure of a firm. This is
especially the case if the board is characterized by a high degree of diversity showing efforts
towards carbon-related activities and carbon-related reporting practices, an ownership
structure containing a high percentage of sustainable investors, and a high degree of media
pressure regarding carbon-related parameters. Furthermore, especially regulatory
developments obliging firms to increase their carbon-related activities or observing whether
firms comply with uniform carbon-related standards may act as an indirect instrument to
enhance the carbon performance and carbon disclosure of a firm.

2.2.3 The financial consequences of carbon performance and disclosure

Financial consequences constitute changes in static firm values. In this review, we use the
term firm value only to explain how the combination of financial performance and risk affects
firm value. Commonly, the two main constituents of firm value are the benefits (e.g., cash
flows) a firm expects to receive (financial performance), which are then discounted with the
firm-related (risk-based) cost of capital (Koller et al., 2015). Hence, we use the term financial
consequences for firms to subsume the two concepts of financial performance and cost of
capital (risk). Furthermore, value relevance of disclosed carbon performance as well as other
carbon-related information and information asymmetry are connected with shareholders’
expectations and trust, which will influence firm value. Carbon performance is part of firms’
operative performance and can have financial consequences through both lower risk and
changes in financial performance (Cuganesan et al., 2007; Lueg et al., 2019). Carbon
disclosure is not part of firms’ operative performance. Lueg et al. (2019) argue that disclosure
hardly affects financial performance through changes of free cash flows. Yet, the improved
transparency of high-quality disclosure reduces the information gap to the stakeholders and
hence has financial consequences through lower risk (Lueg et al., 2019).

Stakeholders may use carbon disclosure to assess the carbon-related activities and related
risks of a firm. They tend to reward firms with sustained carbon performance and disclosure
(Deegan and Rankin, 1997). Conforming to societal expectations increases financial
performance for several reasons (for the numerous reviews on the general link between
environmental and social performance with financial performance, cf. Albertini, 2013; Busch
and Lewandowski, 2018; Dixon-Fowler et al., 2013; Endrikat et al., 2014; Fonseca and Ferro,
2016; Hang et al., 2019; Horváthová, 2010; Margolis and Walsh, 2003; Orlitzky et al., 2003).
 9

For example, sustainable investors—which invest over decades in one firm and care about its
long-range prospects (Barroso Casado et al., 2015)—may provide capital at discounted rates,
as legitimating activities may have a positive impact on firms’ activities and management of
carbon-related risks (Häfner et al., 2017). Disclosing the impact of carbon emissions on
business activities or a firm’ risk profile in relation to carbon-related activities may have
positive financial consequences (Matsumura et al., 2013). A firm that meets, for example,
customers’ expectations by reducing its carbon footprint (Lemma et al., 2019) can reasonably
expect sustained or even higher revenues from existing or potential customers.

Thus, it can be assumed that the expansion of carbon-related activities as well as their
disclosure act as an instrument towards the capital market to illustrate the lower risk profile of
the firm regarding environmental aspects and litigation risks. The capital market will honor
these efforts by lowering the risk premium resulting in improved abilities to raise capital.
Furthermore, by expanding carbon-related activities and related disclosure procedures the
respective firm potentially illustrates its capacity for innovation in the area of environmental
aspects, which could lead to a reduction of risk premiums and an improvement of financial
consequences for firms.

2.3 Research framework

Our research framework is shown in Figure 1. The analysis addresses:

1) Governance-related determinants on carbon performance and disclosure

2) The bidirectional link between carbon performance and carbon disclosure as a
contextual factor
3) Financial consequences for firms of carbon performance and disclosure.

INSERT FIGURE 1 HERE

3 Research method
Empirical research on carbon performance and disclosure is linked with a heterogeneity of
collected data, study designs, theoretical approaches, and analytical techniques leading to the
emergence of largely disjointed bodies of literature. Thus, it is extremely difficult to analyze
the cross-study inconsistencies of results and take stock of the accumulated research in the
field. Literature reviews have become a relevant research method for scholars, practitioners,
and regulators seeking to grasp this knowledge complexity (Torraco, 2005; Webster and
Watson, 2002). For scholars, literature reviews are a type of research that aims to create new
knowledge about a specific topic using existing literature that covers the selected topic.
 10

Literature reviews can facilitate theory development and thereby possibly contribute to
closing gaps and revealing areas where further research is needed. By gaining a deeper
understanding of past evolutions and recent developments in a subject area it is possible for
scientists to extract multiple questions worthy of future research. For practitioners, literature
reviews present useful information and insights into effective organizational developments for
future business strategies and guidance for policy-making and implementation (Bodolica and
Spraggon, 2018).

We relied on established processes to perform our systematic review (Denyer and Tranfield,
2009; Denyer et al., 2008; Fink, 2014; Seuring and Müller, 2008). First, we clarified our
research objective. In contrast to prior literature reviews on carbon accounting (for example,
Stechemesser and Guenther, 2012), the present review aims to focus on links between
governance-related inputs, the relationship between carbon performance and disclosure, and
financial consequences for firms. Our key research questions were:

1) Does governance lead to better carbon performance and disclosure?

2) Do carbon performance and disclosure have positive financial consequences for the
firm?
3) In how far are carbon performance and disclosure positively connected?

Major research gaps and inconsistencies in prior carbon performance research were identified
as well.

Second, we identified the core theories in the field based on our expert knowledge from
previous studies. We outlined the constructs we wanted to search for in the literature and
framed our expectations about existing research gaps. On this basis, we derived the specific
terms to be used for the database search.

Third, we searched international databases instead of pre-defining journals: Web of Science,

Google Scholar (which most likely includes all journals from the Scopus database, which we
did not search separately), the Social Science Network (SSRN), EBSCO, and Science Direct.
We used asterisks to also capture related terms. Our search string included relevant keywords
(“carbon performance” and “carbon disclosure” in connection with “governance“, “board
composition”, “ownership structure”, “stakeholder pressure”, “case law”, “legal
enforcement”, “shareholder rights”, “financial performance”, “capital costs”, “value
relevance”, “information asymmetry”, and related terms).

Fourth, we set the exclusion criteria. We did not restrict the period or the country of origin of
the studies. We limited ourselves to quantitative empirical studies due to the dominant
 11

position of this method within this research field and the intended analysis of economic
relationships. We considered only articles published in English in high-quality journals
employing double-blind review processes. In cases where we were uncertain about the quality
of the peer review process, we relied on the indexing of the journal in the Web of Science.
Most of the studies used secondary (archival) data in order to gather independent, dependent,
and control variables for their regression models (e.g., performance databases or content
analysis of carbon disclosure). Only two studies also referred to primary data (questionnaires)
to capture the effort in environmental management (Lannelongue et al., 2015) and the carbon
management score (Busch and Hoffmann, 2011).

Fifth, we performed a precursory analysis of the articles. We scanned the titles of the articles,
and on this basis we decided which abstracts to read. We did not further pursue articles that
matched our exclusion criteria. We then scanned the theory and method sections of the
remaining articles and, again, eliminated the ones that matched the exclusion criteria. The
screening process resulted in a final sample of 73 studies.

Sixth, we coded the studies according to the selected (sub-)constructs and matched them to
our previously developed framework. Vote-counting methodology (Light and Smith, 1971)
was used. Significant findings and their indicators were the main focus of this review. We did
so by recording coefficients (+), significant negative coefficients (-) as well as insignificant
results (+/-) (see also Tables 2-4). In order to gauge the impact of the studies, we recorded
citation frequencies from Google Scholar on 28 August, 2019 (Podsakoff et al., 2008).

4 Findings of the literature review

4.1 Bibliometric and descriptive content analysis

Figures 2-5 provide a bibliometric analysis and coarse content description of the studies
reviewed. Figure 2 shows that this research field established itself as recently as in 2008.
Since then, we observe a steady increase in studies. Figure 3 demonstrates that data stem from
the United States (12), Australia (9), and China (8). Figure 4 illustrates that studies belong to
the fields of sustainability and ethics, accounting and finance, as well as business, economics,
and management with a moderate dominance of sustainability & ethics journals. The biggest
forums for discussing carbon performance and disclosure are: Business Strategy and the
Environment (11) and Journal of Cleaner Production (5). Figure 5 shows that the most
common topics in this field of research are financial consequences for firms (35) and
governance-related determinants (29).

INSERT FIGURES 2-5 HERE

 12

An increasing number of researchers have studied carbon performance to analyze the

financial consequences, the governance-related determinants, and the bidirectional link
between carbon performance and carbon disclosure. However, no literature reviews on the
link between carbon performance, carbon disclosure and governance-related inputs,
disclosure-performance contexts, and financial consequences for firms have been conducted
so far. Earlier literature reviews have looked solely at carbon accounting (Milne and Grubnic,
2011; Stechemesser and Guenther, 2012; Ascui, 2014; Hahn et al., 2015). Hahn et al. (2015)
conducted the first literature review on carbon disclosure, while Stechemesser and Guenther
(2012) published a review on the management accounting implications of carbon. Ascui
(2014) reviewed social and environmental accounting journals with a broad perspective on
carbon disclosure and reporting, carbon accounting education, and carbon management and
financial accounting. Previous reviews (Ascui, 2014; Stechemesser and Guenther, 2012)
included all research methods and did not focus on topics relating to governance or financial
consequences, or were narrative rather than systematic (Milne and Grubnic, 2011). Moreover,
a broad environmental-financial performance link has been stressed in prior meta-analytic
research. Busch and Lewandowski (2018) included 32 studies and found a positive link. Other
meta-analyses (Albertini, 2013; Dixon-Fowler et al., 2013; Endrikat et al., 2014; Hang et al.,
2019; Horvathova, 2010) have also found a positive significant relationship between
environmental and financial performance. However, Endrikat (2016) conducted a meta-
analysis on market reactions to environmental performance. In total, the present literature
review is clearly differentiated from prior research designs in the field of carbon performance
and disclosure.

Table 1 summarizes the main proxies that have been used as governance-related determinants,
carbon performance and disclosure variables, and financial consequences for firms. In the
next sections, we will differentiate between carbon performance and carbon disclosure studies
and will separately comment on results on moderator and mediator analysis.

INSERT TABLE 1 HERE

4.2 Governance-related determinants

Input factors related to governance have gained relevance in research on carbon performance
and disclosure. Recent literature reviews and meta-analyses on the impact of corporate
governance on CSR (e.g., Guerrero-Villegas et al., 2018) have stressed that both areas have
several connections (e.g., board diversity and sustainable management compensation) and
should also be integrated in recent carbon research. Firm-related governance leads to high-
 13

quality corporate governance, which can be positively related to carbon performance and
disclosure. We distinguish between 1) board composition, 2) ownership structure, and 3)
stakeholder pressure in our literature review. In line with corporate governance, country-
related governance factors also contribute to carbon performance and disclosure strategies.
We make a distinction between 1) case law regimes, 2) strength of legal enforcement, and 3)
shareholder rights (investor protection). In comparison, little research on firm-related
governance, especially on board composition, has been conducted. We also note that the
majority of included studies rely on one or two carbon performance or disclosure proxies. The
dummy variable “participation in CDP” represents the most famous proxy. Moderator and/or
mediator analysis (e.g., environmental performance and green product innovation) is very rare
in this research topic.

4.2.1 Firm-related governance (corporate governance)

Board composition. We found research related to board independence, board diversity, board
committees, and other descriptive measures. Haque (2017) used content analysis to study the
influence of board independence on two carbon performance proxies and found positive
results. Kilic and Kuzey (2019) and Liao et al. (2015) also stated that board independence
increases the probability that a firm would participate in the CDP. Akbas and Canikli (2019)
found no evidence that board independence impacts CDP participation.

In line with those carbon performance studies, Jaggi et al. (2018b), Elsayih et al. (2018), and
Liao et al. (2015) found that independent board directors are related to higher carbon
disclosure levels. However, according to Akbas and Canikli (2019) and Kilic and Kuzey
(2019) board independence does not influence carbon disclosure.

In line with board independence, board diversity increases board effectiveness and should
lead to better carbon performance and disclosure. In line with other (sustainable) corporate
governance research, gender diversity represents a key proxy for an effective board
composition. There are indications that the presence of at least three female directors on the
board increases CDP participation (Ben-Amar et al., 2017). Furthermore, Haque (2017) and
Liao et al. (2015) found a positive impact of gender diversity on carbon performance.
According to Kilic and Kuzey (2019), foreign diversity increases CDP participation.

Kilic and Kuzey (2019) also stated that foreign diversity leads to higher carbon disclosure
quality. In contrast to carbon performance, Liao et al. (2015) did not find any influence of
gender diversity on carbon disclosure. Elsayih et al. (2018) found that total board diversity
(not only gender) increases carbon disclosure quality.
 14

Prior research also assumed that the implementation of board committees, especially
sustainability or environmental committees, positively influences carbon performance and
disclosure strategies. According to Kilic and Kuzey (2019) and Liao et al. (2015), the
existence of a sustainability or environmental committee leads to increased CDP participation.
Carbon performance is strongly linked to carbon risks and risk management (systems), so the
existence of risk management committees can also be related to better carbon performance.
However, Krishnamurti and Velayutham (2018) found no significant results related to the
existence of risk management committees. Regarding carbon disclosure, the existence of
environmental committees also increases its quality (Berthelot and Robert, 2011; Elsayih et
al., 2018; Jaggi et al., 2018b; Liao et al., 2015). Rankin et al. (2011) found no significant
impact on carbon disclosure. According to Krishnamurti and Velayutham (2018), a combined
audit and risk management committee negatively influences carbon disclosure quality.

We already noted that moderator analysis is not common in recent empirical research on
carbon performance and disclosure. One exception is the study by Jaggi et al. (2018a). The
authors stated that the existence of an environmental committee moderates the positive link
between carbon disclosure and stock price, as it strengthens the positive market reactions to
carbon disclosure.

Other board composition determinants with lower relevance in prior research relate to age,
education, and multiple directorships of top executives. With regard to carbon performance,
Haque (2017) reported insignificant results for multiple directorships. In line with upper
echelons theory (Hambrick and Mason, 1984), the individual characteristics of board
members, including Chief Executive Officer (CEO) education, tenure, and compensation,
influence governance mechanisms. According to Lewis et al. (2014), CEOs with an MBA
(legal) degree are linked with higher (lower) CDP participation than other firms. The authors
also found a positive impact of CEO tenure on CDP participation. The presence of a
sustainability compensation policy for the CEO also increases carbon performance (Haque,
2017).

Ma et al. (2019) referred to environmental disclosure and found a positive (negative)

influence of an MBA (legal) educational background of top management members. However,
the authors found no significant impact of top management age. They also included green
technology patents as the moderator and reported a U-shaped link with MBA educational
background.
 15

Moreover, researchers have studied the effect of other governance measures on carbon
performance and disclosure. These include total corporate governance scores (Rankin et al.,
2011), board effectiveness (Ben-Amar and McIlkenny, 2015), board entrenchment scores
(Aggarwal and Dow, 2012), and separation between ownership and control (Peng et al.,
2015). Although these scores do not focus on specific governance variables a variety of
different board composition items in order to measure overall quality or effectiveness of the
board of directors is included. The results of their tests are positive (disclosure: Rankin et al.,
2011; CDP participation: Ben-Amar and McIlkenny, 2015) or inconclusive (disclosure: Peng
et al., 2015; environmental performance: Aggarwal and Dow, 2012). While Akbas and
Canikli (2019) reported a negative impact of board size on CDP participation, Kilic and
Kuzey (2019) did not find any impact on either CDP participation or carbon disclosure.

Ownership structure. We categorize the empirical research on the influence of ownership

structure on carbon performance and disclosure according to ownership type (e.g., state,
managerial, or institutional). State ownership and institutional ownership were the two most
relevant determinants in prior studies. In comparison to board composition, research results
regarding the impact of ownership structure on carbon performance and disclosure are more
heterogeneous. Focusing on state ownership, Giannarakis et al. (2018) as well as Stanny and
Ely (2008) did not find any impact on carbon performance. However, according to
Giannarakis et al. (2018) and Hermawan et al. (2018) state ownership has a positive influence
on carbon disclosure. According to Chu et al. (2013), state ownership decreases the quantity
of carbon disclosure. Peng et al.’s study (2015) did not find any relationship between state
ownership and carbon disclosure. Moreover, managerial ownership has been included in prior
research. While Aggarwal and Dow (2012) did not find any impact on environmental
performance, Elsayih et al. (2018) reported an increased quality of carbon disclosure.

Some researchers have concentrated on institutional investors, especially sustainable

investors. According to Akbas and Canikli (2019) and Wegener et al. (2013), institutional
ownership and CDP participation are positively linked. Furthermore, institutional ownership
leads to increased carbon disclosure quality (Jaggi et al., 2018b). However, insignificant
results appear with regard to environmental performance (Aggarwal and Dow, 2012) and
carbon disclosure quality (Hermawan et al., 2018). Additionally, Liu and Anbumozhi (2009)
and Berthelot and Robert (2011) found that shareholder concentration and ownership
structure do not influence climate change disclosure. As most researchers control for industry
effects, very few studies include environmentally sensitive industries as moderator, dependent
variable, or independent variable. One exception is Liu and Anbumozhi’s (2009) study, which
 16

demonstrated a positive impact of environmentally sensitive industries on environmental

disclosure.

Stakeholder pressure. Other stakeholders than shareholders also influence carbon

performance and disclosure. Carbon performance and its disclosure are associated with
increased managerial discretion, risks of greenwashing, and information overload. Financial
intermediaries – for instance, rating agencies or external assurors – act as gatekeepers for
stakeholders and as confirmation for audit and sustainability committees. Giannarakis (2016)
reported a positive impact of analyst ratings on CSR performance and a negative impact on
carbon disclosure quality. Moreover, shareholder and government resolution targets within
the same industry positively influence CDP participation (Reid and Toffel, 2009). With
reference to media coverage, a positive influence on both CDP participation (Li et al., 2018)
and climate change disclosure (Berthelot and Robert, 2011) can be found. Two studies also
relate to external environmental assurance and disclosure. Giannarakis et al. (2018) found a
positive impact of environmental assurance on climate change disclosure. However, the use of
a big four audit firm appears unrelated to carbon disclosure strategies (Berthelot and Robert,
2011).

Li et al. (2018) conducted the only mediator analysis in this research strand so far. The
authors stated that green process innovation mediates the negative link between media
coverage and CDP participation.

4.2.2 Country-related governance

In recent years, quantitative empirical research on carbon performance and disclosure has
relied on cross-country designs. Research on country-related governance factors has
complemented research on corporate governance measures. This review finds three main
subgroups of variables: 1) the presence of a case (common) law, 2) the degree of legal
enforcement, and 3) the range of shareholder rights (investor protection). In line with research
on external corporate governance measures, prior research on country-related governance was
rather heterogeneous. While the amount of studies on that topic has been extremely low so
far, the majority of studies do not address carbon disclosure variables.

Case law. In contrast to sustainability performance and disclosure research, only two studies
explicitly investigate the impact of a case law regime on CDP participation (Luo et al., 2012;
Grauel and Gotthardt, 2016). Both studies stated that a case law regime, and thus a more
shareholder-focused orientation, exhibits a positive significant relationship.
 17

Strength of legal enforcement. Grauel and Gotthardt (2016) also examined the link between
legal enforcement and CDP participation and found a positive link. Zhou et al. (2016)
conducted the only study on voluntary carbon assurance and the choice of carbon assurance
provider (professional accountant) as an additional proxy of carbon performance so far. The
authors found a negative link between these determinants, which originated from the
substitutional relationship between legal enforcement and carbon assurance activities. Luo et
al.’s (2012) study on environmental regulatory systems, ETS implementation, and the
ratification of the Kyoto Protocol showed heterogeneous results. There was a positive impact
of ETS adoption, and inconclusive relationships with environmental regulatory systems and
the ratification of the Kyoto Protocol.

Regarding moderator analysis, there are indications that corporate governance performance
moderates the positive link between stakeholder orientation and carbon assurance (Zhou et al.,
2016). Multinational firms as moderator did not influence the relationship between legal
enforcement and CDP participation (Grauel and Gotthardt, 2016).

Shareholder rights (investor protection). Yu and Ting (2012) included FTSE Global 500
firms and stated that shareholder rights and investor protection are positively related to carbon
performance and disclosure. Assuming a complementary relationship, Zhou et al. (2016)
found carbon assurance to be more prevalent in stakeholder-oriented country regimes.

Table 2 summarizes the results on governance-related inputs.

INSERT TABLE 2 HERE

4.3 The carbon performance–disclosure link and vice versa

In contrast to quantitative empirical research on sustainable performance and/or disclosure,

carbon research has studied the bidirectional relationship between carbon performance and
carbon disclosure. This means that carbon performance affects carbon disclosure and vice
versa. Thus, it is not clear whether carbon performance represents a determinant or a
consequence of carbon disclosure practice. Our literature review included this relationship as
a contextual factor that might be influenced by governance-related factors or financial
consequences for firms. There is less research in this area compared to the other two research
categories, and the validity of these studies with respect to reversed causality and endogeneity
concerns is very controversial. Thus, the heterogeneous links and results are not surprising.
Moreover, studies performing moderator analysis remain extremely scarce to date.
 18

Carbon performance-disclosure link. Most prior research concerning the carbon

performance–disclosure link found a positive relationship. Studies by Giannarakis et al.
(2017a; 2017b; 2018) and Dawkins and Fraas (2011) investigated climate change disclosure
and policy. Others concentrated on CDP-related disclosure (Ott et al., 2017) or carbon
disclosure quality (Guenther et al., 2016). Only Gallego-Alvarez et al. (2011) reported a
negative impact on carbon disclosure quality. Ott et al. (2017) also found that both
competitive and sustainable sensitive industries have a positive impact on carbon disclosure.

Guenther et al. (2016) stated that government politics moderate the positive carbon
performance-disclosure link. Industry affiliation, however, has no moderating influence.
Moreover, according to Dawkins and Fraas (2011), media visibility represents a moderator of
the carbon performance-disclosure relationship.

Carbon disclosure-performance link. Only two studies on the carbon disclosure–performance

link so far show positive (Qian and Schaltegger, 2017; related to the change in carbon
performance) and negative (Hassan and Romilly, 2018) results.

Table 3 summarizes studies and results on this topic.

INSERT TABLE 3 HERE

4.4 Financial consequences for firms

Financial consequences for firms of carbon performance and disclosure are the most intensive
research topics in our literature review. In this context, the literature assumes that carbon
performance and disclosure positively impact financial consequences for firms in the long run
(Brouwers et al., 2018). In more detail, carbon performance and disclosure should lead to
decreased information asymmetry for shareholders and other stakeholders, increased value
relevance of the related performance figures and disclosure items, and finally reduce capital
costs and increase financial performance. We note that the majority of included studies
address carbon performance and neglect disclosure. Nevertheless, moderator analysis has
been included more frequently than the other two research strengths. However, mediator
analysis and instrumental variables have been used rarely so far (Nishitani and Kokubu, 2012;
Zhou et al., 2018).

4.4.1 Information asymmetry

Four empirical studies show that carbon disclosure reduces information asymmetry for
shareholders and other stakeholders. Studies on carbon performance do not exist yet. Zhou et
 19

al. (2018) used the management expense ratio and total asset turnover as agency cost proxies
and found a negative impact of carbon disclosure quality. Krishnamurti and Velayutham
(2018) stated that stock price volatility decreases and stock market liquidity increases if
carbon disclosure quality is high. Borghei et al. (2018) supported these results, using stock
volatility and bid-ask spreads. Schiemann and Sakhel (2018) used climate-related physical
risk disclosure as a dummy variable and observed a low bid-ask spread, which was
pronounced in firms acting under the EU’s ETS.

Schiemann and Sakhel (2018) also indicated that firms under EU ETS regulation moderate
the negative impact of carbon disclosure on bid-ask spreads. Zhou et al. (2018) did not find
any hints that earnings management (accruals) mediate the negative relationship between
carbon disclosure and agency costs. Furthermore, heavy pollution control groups did not
influence the relationship.

4.4.2 Value relevance

Value relevance of performance and disclosure items is one of the most important strands in
finance and accounting research. It applies two main methods: event studies and the modified
Ohlson model (Matsumura et al., 2013). The Ohlson model focusses on stock price or the
market value of equity, whereas event study designs rely on cumulative abnormal returns
(CAR) to operationalize the value relevance of carbon information. The number of value
relevance studies in CSR and integrated reporting research has increased in recent years
(Berthelot et al., 2012). To this date, there are only five studies on carbon disclosure, of which
three also include moderators. Value relevance studies using the Ohlson model and stock
price found partially supportive results. Griffin et al. (2017) found a positive impact of carbon
performance on stock price. According to Clarkson et al. (2015), carbon allowance does not
influence the market value of equity, whereas carbon allowance shortfall decreases it. Event
study designs have exhibited significant negative impacts – and thus increased value
relevance – on CAR, arguing that they are bad news for investors. This relates to carbon
performance (Luo and Tang, 2014) and disclosure (Lee et al., 2015b). Kim and Lyon (2011)
did not find any relationship between CDP participation and CAR.

In view of moderator analysis, Lee et al. (2015b) stressed that a high frequency of carbon
communication through the media mitigates the negative carbon disclosure-CAR link. In the
study by Clarkson et al. (2015), carbon performance and competitive industries weaken the
negative link between carbon allowance shortfall and market value of equity.
 20

4.4.3 Financial performance and capital costs

Busch and Lewandowski (2018) conducted a meta-analysis including 32 studies, showing a

negative relationship between carbon performance and financial performance. Relative
emission proxies were more likely to produce significant results than absolute emissions
(Busch and Lewandowski, 2018). Measures of financial performance can be accounting-based
(e.g., Return on Assets (ROA) and Return on Equity (ROE)) or market-based (e.g., Tobin’s
Q). Market-based proxies were more positively related to carbon performance than
accounting-based measures (Busch and Lewandowski, 2018). As market-based proxies focus
more on long-term aspects and cannot easily be influenced by managers compared to
accounting-based performance, investors seem to incorporate present and future benefits from
increases in carbon performance (Busch and Lewandowski, 2018).

In line with meta-analytical evidence, the majority of studies in this review reported a positive
impact of carbon performance and disclosure on financial performance. While most of the
studies included carbon performance, only two studies addressed carbon disclosure
(Matsumura et al., 2013; Saka and Oshika, 2014). According to Ganda and Milondzo (2018),
Gallego-Alvarez et al. (2015), and Brzobohaty and Jansky (2010), carbon performance
increases accounting-based financial performance. Lee et al. (2015a), Saka and Oshika
(2014), Matsumura et al. (2013), Aggarwal and Dow (2012), Nishitani and Kokubu (2012),
and Hatakeda et al. (2012) detected significant positive results with regard to market-based
performance. Iwata and Okada (2011) found significant results for both accounting- and
market-based measures. Matsumura et al. (2013) and Saka and Oshika (2014) also reported a
positive impact of carbon disclosure on market-based financial performance.

With respect to moderator analysis, Hatakeda et al. (2012) stated that stock price volatility,
large shareholders, and leverage strengthen the positive carbon-financial performance link.
Chakrabarty and Wang (2013) studied different performance proxies with internationalization
as a moderating variable. The positive impact of climate change mitigation on sales
effectiveness and product leadership as financial performance measures was strengthened by
the degree of internationalization of the firm. According to Saka and Oshika (2014), carbon
performance moderates the positive carbon disclosure-financial performance link. Using a
dynamic regression model and including the years of adoption of the ISO 14001 standard as
an instrumental variable, the authors also found a positive impact of carbon performance on
financial performance.
 21

Busch and Hoffmann (2011) used a questionnaire to distinguish carbon emission intensity
from carbon management score. They found a negative impact of carbon emissions on
Tobin’s Q and a positive impact of the carbon management score on ROE and Tobin’s Q. The
Australian setting of Wang et al. (2014) represents the only study with a significant negative
impact of carbon performance on financial performance. Some researchers found an
insignificant relationship between carbon performance and financial performance
(accounting-based measures: Lannelongue et al., 2015 and Gallego-Alvarez et al., 2014;
negative ROA and positive Tobin’s Q: Delmas et al., 2015). Brouwers et al. (2018) did not
find any significant relationships between carbon emission intensity on the one hand, and
accounting-/market-based performance on the other. Brouwers et al. (2018) also demonstrated
that good carbon performance does not always pay off. The authors found that lower levels of
carbon emissions are only rewarded by the market if firms are not able to pass carbon costs on
to the consumers (moderator analysis), either due to industry characteristics or firm-related
carbon efficiency.

Few studies have analyzed non-linear relationships, assuming an inverted u-shaped link
between carbon performance and financial performance. Focusing on ROA, Trumpp and
Guenther (2017) and Tatsuo et al. (2010) found a u-shaped relationship, suggesting that
carbon performance reaches an optimum leading to a maximum financial performance. This
was also found in research that used return on sales (ROS) – but not ROA – as an accounting-
based measure (Fujii et al., 2013) and that used Tobin’s Q as a market-based proxy (Misani
and Pogutz, 2015). Misani and Pogutz (2015) also stated that environmental performance
moderates the carbon emissions-financial performance relationship.

As part of firm performance, carbon research is linked to the impact of carbon performance
and disclosure on the cost of capital (total costs, cost of equity, and/or cost of debt). Five
studies have been conducted on these aspects, mostly related to carbon performance and with
similar results. In this context, Li et al. (2014) and Chen and Gao (2012) distinguished
between equity costs and debt capital costs and found negative results for both measures. Kim
et al. (2015) focused on the costs of equity and supported these results. There was also a
negative link found by Jung et al. (2018), who analyzed the impact of carbon performance on
the cost of debt. Lemma et al. (2019) included a proxy for total capital costs and reported a
negative impact of carbon disclosure.

Jung et al. (2018) included CDP participation as moderator variable and stated that there is
only a positive impact of carbon emissions on debt for firms failing to respond to CDP. The
 22

differentiation between high and low carbon emissions as moderator variable did not
influence the negative relationship between carbon disclosure and capital costs (Lemma et al.,
2019). According to Kim et al. (2015), the positive impact of carbon emission intensity on the
cost of equity is less pronounced in carbon intensive industries.

Table 4 summarizes the findings on financial consequences.

INSERT TABLE 4 HERE

5 Discussion
5.1 Synthesis of the paper and contributions

Carbon performance is an innovative topic in business research that has raised controversy in
research, regulatory, and practical environments. The United Nations (UN) Sustainable
Development Goals and the Paris Agreement have stressed the business implications of
climate change policies. Carbon performance measurement and carbon disclosure are
voluntary in most international business contexts, and many standards exist, so managerial
discretion with respect to transparency on carbon performance is pivotal. While literature
reviews on carbon-related research exist (Ascui, 2014; Hahn et al., 2015; Milne and Grubnic,
2011; Stechemesser and Guenther, 2012), our review is the first to offer a comprehensive,
legitimacy theory-based framework (including governance-related determinants and financial
consequences) of carbon performance and disclosure that systematically reviews empirical-
quantitative studies.

Our review makes the following contributions to the research field of carbon performance and
disclosure: First, we structure this quickly expanding field into areas that separately review
the interactions of the phenomenon itself (carbon performance and its disclosure; cf. Table 3),
its governance-related determinants (cf. Table 2), and the financial consequences for firms (cf.
Table 4). Second, we provide a comprehensive list of variables and proxies used in the studies
(cf. Table 1) and indicate their main statistical effects. We thereby map all existing studied
relationships and can point to the potential, under-researched relationships (e.g., moderator
and mediator analysis). Third, we develop a research agenda that aims at changing the current
scholarship and affecting future research designs. Fourth, we highlight outstanding insight.
For instance, there are several contested relationships in our proposed framework. The reason
for this is probably rooted in the context, such as industry characteristics (carbon sensitive
branches) or national settings (e.g., strength of legal enforcement). However, studies often do
not offer enough data-based insight. This leads to an undertheorized discussion of results,
which makes them difficult to compare across studies.
 23

Our review also carries implications for practice: First, we provide a record of
accomplishment of recent studies showing that carbon performance and disclosure have high
relevance for firms at large, not just for a sustainable avant-garde. Second, the composition of
studies and their research fields shows the importance of cooperation across academic fields
in carbon-related issues (e.g., finance & accounting, data science, economics, engineering,
communication, and sustainability). Third, we would like to convey to firms that carbon
performance and disclosure have substantial positive financial consequences. This is of
interest not only to the usual stakeholders (such as regulators and local communities) but also
to a substantial number of long-term (sustainable) investors, who appreciate both the benefits
(financial performance) and the risk-management aspects of managing carbon. Last, digital
transformation will automate much of the performance management and disclosure on carbon
in the future (Wanner and Janiesch, 2019). Computer-aided text analysis will reduce the risk
of creating information overload. Avant-garde technologies like blockchain will provide
publicly verifiable accounts of carbon performance. In this way, big data and blockchain
technology will limit the opportunities for greenwashing.

5.2 Limitations and recommendations for future research

5.2.1 Content-related contributions

While we stress that a variety of firm-related governance determinants, especially board

composition, has been analyzed in prior research, board composition research should be
extended by addressing additional variables in line with corporate governance research – for
example, board member interlocks (Velte and Stawinoga, 2017a). Top management and the
personal characteristics of specific members of the board should be analyzed using a
behavioral agency framework. In view of the low number of studies on these topics, age,
gender, education, personality traits, and values like overconfidence or narcissism should be
analyzed in detail.

Similar to board composition, there is only a small body of research on the impact of other
corporate governance variables, such as ownership structure and stakeholder pressure. Audit
and assurance aspects have rarely been included as determinants or consequences of carbon
performance and disclosure. Analyzing the influence of financial audit and sustainability
assurance on carbon performance and disclosure can be most useful, as performance
measurement and disclosure are linked with increased managerial discretion and limited
objectivity, implying greenwashing (Velte and Stawinoga, 2017b).
 24

Only a few country-related governance variables and, thus, transnational studies have been
conducted. Researchers should include cultural aspects (e.g., those based on Hofstede or
Schwartz) in line with studies on general CSR issues. As financial consequences for firms
have been linked to financial performance and capital market reactions, other stakeholder
groups should be studied (e.g., customers, employees, suppliers). The impact of carbon
performance on financial analysts (e.g., analyst coverage) remains unknown. Furthermore,
financial performance measures are dominant in prior carbon-related research. The link
between carbon performance and earnings management or tax avoidance has not been
analyzed to date. There is a major research gap as sustainability and financial disclosure have
many interdependencies in business practice. Finally, carbon performance and disclosure
should be linked with sustainable supply chain and risk management in future research
designs.

Our main research results and research gaps are highlighted in Figure 6.

INSERT FIGURE 6 HERE

5.2.2 Methodological contributions

Methodological approaches are characterized by a high degree of homogeneity so far . Carbon

performance (e.g., participation in the CDP) is often used as a dummy variable to analyze
governance-related determinants. Though easy to measure, this has decreased the validity of
recent studies. Furthermore, a clear separation of proactive/reactive carbon strategies,
past/future-oriented measures, and mandatory/voluntary regimes has been rare, and carbon
performance proxies are heterogeneous. Thus, it is important to include a variety of measures
and to check for robustness to strengthen the validity of the studies.

In line with the advancement in studies in business research in general, researchers should
actively address endogeneity concerns (e.g., omitted variable bias, simultaneity, and
measurement error) (Antonakis et al., 2014; Wintoki et al., 2012). Future research should start
employing the two standard remedies to endogeneity, especially dynamic/simultaneous-
equation models with instrumental variables and propensity score analysis, such as Heckman
two/three step approaches.

Linear relationships have commonly been assumed in quantitative empirical carbon

performance and disclosure research. However, prior research on sustainable finance topics
has indicated that a non-linear (curvilinear) relationship between carbon and financial
performance might be more realistic. While some researchers have addressed these issues
 25

(Tatsuo et al., 2010; Trumpp and Guenther, 2017), many factors, especially governance-
related determinants, have been discussed as linear relationships.

As carbon performance and disclosure represent interdependent proxies, researchers should

include additional moderator and mediator analysis and focus on content analyses of carbon
disclosure to check for robustness. We note that moderator and especially mediator analysis is
not common in empirical carbon research to date. The governance-related determinants and
financial consequences of carbon performance and disclosure are dependent on firm- and
country-related context variables – e.g., environmental sensitive industries, Kyoto protocol
signing countries, etc. – and should be further addressed in future research designs. As
greenwashing and information overload represent major risks in carbon performance and
disclosure, moderator analysis should focus on the effectiveness of environmental
management systems. An environmental management system gathers and processes
environmental data for the management of their environmental activities (Ott et al., 2017).
The literature states that the implementation of an environmental management system is
linked with lower preparation costs when firms measure carbon performance or prepare their
carbon disclosure (Fonseca and Domingues, 2018). In this context, the International
Organization for Standardization (ISO) 14000 certificate can mainly increase stakeholder trust
in carbon-related information, as the certificate provides a third-party assurance statement of
the existence of a proper environmental management system (International Organization for
Standardization (ISO)). As part of an environmental management system, researchers are also
invited to analyze carbon-negative firms and their specific strategies – for example, biochar.
Biochar represents a carbon-rich product when biomass (such as wood, manure, or crop
residues) is heated in a closed container with little or no available air (Mardoyan et al., 2015).
The biochar technology improves the environment in many ways and, in addition to this,
biochar sequestration, in combination with sustainable biomass production, can be carbon
negative and therefore remove carbon dioxide from the atmosphere, with major implications
for climate change (Marousek et al., 2019; 2014).

Finally, we would like to mention the limitations of our study. Vote counting is a limited
method for synthesizing evidence from multiple evaluations, which involves comparing the
number of significances. We do not take the size of the samples or the size of the effects into
account. These limitations are lessened by a quantitative meta-analysis. Our governance-
related determinants and financial consequences are too heterogeneous to conduct an overall
meta-analysis. Furthermore, the amount of prior studies is still too low to conduct a separate
meta-analysis on specific variables (e.g., ownership structure). One exception relates to the
 26

recent meta-analysis on the impact of carbon performance on financial performance by Busch

and Lewandowski (2018). Meta-analysis is a very useful research method in sustainability
studies, especially on governance-related determinants and financial consequences. Whereas
we stress heterogeneous results in empirical quantitative studies on carbon performance and
disclosure, the goal of meta-analyses is to statistically summarize the existing research and
increase the quality of the research results. Furthermore, meta-analyses can include relevant
moderator analysis across multiple studies. In view of the increase in research activity on
carbon performance and disclosure, we also expect that future researchers will focus on this
research method.
 27

Figures and tables

Figure 1: Empirical-quantitative research on carbon performance & disclosure

 28

Figure 2: Count of cited published papers by publication year 2008-2019

(n=73; absolute and in per cent)
 29

Figure 3: Geographic location of cited published papers

(n=73; by region; in absolute numbers and per cent)
 30

Figure 4: Research fields of published papers

(n=73; journals by research field; absolute and in percent)
 31

Figure 5: Content of cited published papers

(n=73; by content; in absolute numbers and per cent)
 32

Table 1: List of governance-related determinants, carbon performance and disclosure proxies, and financial consequences for firms

Governance-related determinants Measures of carbon performance and disclosure Financial consequences for firms

Firm-related (corporate governance) Carbon performance: Information asymmetry:

Board characteristics: • CDP participation • Stock price volatility
• Independence • Carbon emissions (intensity) • Stock market liquidity
• Diversity • Climate performance leadership index • Bid-ask-spread
• Education • Climate change policy (dummy; yes/no) • Agency costs
• Age • Carbon reduction initiatives index
• Committees • Environmental (impact) performance
• Size
• CSR-related CEO compensation policy
• Multiple directorships (“busy boards”)
• Board effectiveness
• CEO tenure
• Board entrenchment

Ownership structure: Carbon disclosure: Value relevance:

• Institutional ownership
• Dummy (yes/no) • Stock price/market value of equity (Ohlson
• State ownership
• Disclosure quality (index; scoring) model)
• Managerial ownership
• Disclosure quantity (count) • Cumulative abnormal returns (CAR)
• Ownership concentration

Stakeholder pressure: Financial performance & capital costs:

• Environmental assurance • ROA, ROE, ROS, ROI, ROIC
• Media coverage • Tobin’s Q
• Financial analyst ratings • WACC
• External audit (big four) • Cost of equity
• Cost of debt

Country-related governance:
• Legal enforcement strength
 33

• Case law vs. code law

• Shareholder rights
 34

Table 2: Empirical-quantitative research on the impact of firm- and country-related governance on carbon performance and disclosure
Notes: Carbon emissions represent an inverse variable of carbon performance. We recorded citation frequencies from Google Scholar on 28 Aug. 2019.

# cites Dependent variable

Year of State Independent variable(s) and
Author(s) Journal (s): carbon
publica Sample significant results
performance &
tion Year(s)
disclosure
2019 1 Ma et al. International Journal of China • Environmental • Top management
Environmental Research 2,329 firm-year disclosure educational background
and Public Health observations (dummy; (MBA (pos. impact); legal
2015-2017 yes/no) (neg. impact)
• Top management age (pos.
impact)
• Moderator: environmental
performance (green
technology patents) (U-
shaped link with MBA
educational background)
2019 3 Kilic and Kuzey International Journal of Turkey • Participation in • Board independence (pos.
Climate Change n.A. the CDP impact on CDP
Strategies and 2011-2015 • Carbon participation)
Management disclosure • foreign diversity (pos.
quality (index; impact on CDP-
scoring) participation and
disclosure)
• Sustainability committee
(dummy) (pos. impact on
CDP participation and
disclosure)
• Board size (no impact)
• Gender diversity ( no
impact)
2019 1 Akbas and Canikli Sustainability Turkey • Participation to • Institutional ownership
84 CDP (dummy) (pos. impact on CDP
 35

2014-2016 • Carbon participation and

disclosure disclosure)
(dummy) • Firm size (no impact)
• Board size (negative impact
on CDP participation
• Board independence (no
impact)

2018 4 Giannarakis et al. Corporate Social Europe • Climate • State ownership (pos.
Responsibility and 215 firms Performance impact on disclosure)
Environmental 2014 Leadership • Environmental assurance
Management Index (pos. impact on disclosure)
• Climate change
policy (dummy;
yes/no)
2018 39 Li et al. Journal of Business Ethics China • Participation in • Environmental legitimacy
178 firms the CDP (media coverage) (neg.
2008-2012 (dummy) impact)
• Mediator: green product
innovation (green patents),
green process innovation
(ISO 14001 certification)
(green process innovation
mediates the link)

2018 10 Krishnamurti and Pacific-Basin Finance Australia • Carbon • Risk management

Velayutham Journal 558 firm-year disclosure committee (dummy) (no
observations quality (index; impact)
2006-2009 scoring) • Combined audit and risk
management committee
(dummy) (neg. impact)
2018 7 Jaggi et al. Review of Quantitative Italy • Financial • Carbon disclosure quality
Finance & Accounting 516 firm-year performance: (index; scoring) (pos.
observations Stock price; impact on stock price and
2010-2013
 36

market to book market to book value)

value • Moderator: environmental
committee (dummy)
(moderates the link)
2018 12 Jaggi et al. Organization & Italy • Carbon • Environmental committee
Environment 671 firm-year disclosure (dummy) (pos. impact)
observations quality (index; • Institutional ownership
2010-2013 scoring) (pos. impact)
• Board independence (pos.
impact)
2018 5 Hermawan et al. International Journal of Indonesia • Carbon • State ownership (pos.
Energy Economics and 22 firms disclosure impact)
Policy 2014-2016 quality (index; • Institutional ownership (no
scoring) impact)

2018 4 Elsayih et al. Accounting Research Australia • Carbon • Board independence (pos.
Journal 203 firm-year disclosure impact)
observations 2009-2012 quality (score; • Board diversity (pos.
index) impact)
• Managerial ownership (pos.
impact)
• Environmental committee
(dummy) (no impact)

2017 115 Ben-Amar et al. Journal of Business Ethics Canada • Participation in • Gender diversity
541 firm-year CDP (dummy) (existence; at least three
observations 2008-2014 women) (pos. impact)

2017 32 Haque British Accounting UK • Carbon • CSR CEO compensation

Review 256 firms performance policy (dummy; yes/no)
2002-2014 (content (pos. impact)
analysis; score; • Board independence (pos.
carbon impact)
reduction • Gender diversity (pos.
 37

initiatives index; impact)

GHG emissions) • Multiple directorships (no
impact)

2016 4 Giannarakis et al. Journal of Business Worldwide • Carbon • Analyst ratings (by
Economics and 92 firms disclosure Bloomberg database) (neg.
Management 2009-2013 quality (scoring impact on quality and pos.
by Carbon impact on performance)
Disclosure
Project)
• CSR
performance (by
Bloomberg
database)
2016 13 Zhou et al. Auditing Worldwide • Carbon • Country level governance
2,194 firm-year assurance (stakeholder orientation,
observations (dummy; legal enforcement system)
2008-2011 yes/no); (stakeholder orientation has
assurance a pos. impact on assurance;
provider enforcement has a negative
(professional impact)
accountant • Moderator: Corporate
versus non)) governance performance
(by Asset4 rating)
(corporate governance
performance moderators
the links)

2016 16 Grauel and Gotthardt Journal of Cleaner Worldwide • Participation in • Legal strength of
Production 2,379 firms the CDP enforcement (World
2011-2013 (dummy) Economic Forum
Executive Option Survey)
(pos. impact)
• Common law regime (pos.
impact)
 38

• Moderator: Multinational
firms (no impact)
2015 28 Peng et al. The World Economy China • Carbon • State ownership (dummy)
7,948 firms disclosure (no impact)
2008-2012 (dummy; • Separation between
yes/no; quality ownership and control
(index based on (corporate governance) (no
ISO 14064-1)) impact)

2015 260 Liao et al. The British Accounting UK • Participation in • Gender diversity (pos.
Review 329 firms the CDP impact on CDP-
2011 (dummy) participation)
• Carbon • Board independence (pos.
disclosure impact on CDP-
quality participation)
• Environmental committee
(dummy) (pos. impact on
CDP-participation)

2015 63 Ben-Amar and Business Strategy and the Canada • Participation in • Board effectiveness
McIlkenny Environment 559 firm-year the CDP (CCBE’s board shareholder
observations (dummy) confidence index) (pos.
2008-2011 • Carbon impact on CDP-
disclosure participation)
(dummy; quality
(index; scoring))
2013 31 Wegener et al. Accounting Perspectives Canada • Participation in • Domestic signatory
319 firms the CDP (institutional) investor
2006-2009 (dummy; ownership (pos. impact on
yes/no) CDP-participation)

2013 76 Chu et al. Managerial Auditing China • Carbon • State ownership (neg.
Journal 92 firms disclosure impact)
 39

2010 quantity
(number of
sentences)
2014 162 Lewis et al. Strategic Management USA • Participation in • CEO tenure (pos. impact)
Journal 2,157 firm-year the CDP • CEO education (MBA
observations (dummy; degrees pos. impact;
2002-2008 yes/no) lawyers neg. impact)

2012 19 Aggarwal and Dow The European Journal of USA • Environmental • Board entrenchment (E-
Finance 230 (426) firm-year (impact) index) (no impact)
observations performance • Managerial ownership (no
2009 (EIS) impact)
(Newsweek • Institutional ownership ( no
rating; KLD impact)
rating))
2012 14 Yu and Ting Management Decision Worldwide (FTSE • Carbon • Shareholder rights (report
Global 500) disclosure by World Economic
369 firms quality (index; Forum) (pos. impact on
2008 scoring) quality and performance)
• Carbon • Strength of investor
performance protection (report by World
(emissions; Economic Forum) (pos.
emission impact on quality and
intensity) performance)

2012 179 Luo et al. Journal of International Worldwide (CDP • Participation in • Country with emission
Financial Management & Global 500) the CDP trade scheme adoption
Accounting 2009 (dummy) (pos. impact)
291 firms • Country with Kyoto
Protocol ratification (no
impact)
• Environmental regulatory
system (no impact)
• Common law regime (pos.
 40

impact)

2011 202 Rankin et al. Accounting, Auditing & Australia • Carbon • Environmental committee
Accountability Journal 187 firms disclosure (no impact)
2007 (dummy; • Corporate governance
yes/no; quality score (by the WHK
(index based on Horwath report) (pos.
ISO 14064-1) impact)

2011 49 Berthelot and Robert Issues in Social and Canada • Climate change • Media visibility (Globe and
Environmental 64 firms disclosure Mail newspaper
Accounting 2007 quality (scoring; appearance) (pos. impact)
index) • Environmental committee
(pos. impact)
• Ownership structure (no
impact)
• Audit firm (big four) (no
impact)

2009 447 Liu and Anbumozhi Journal of Cleaner China • Environmental • Environmental sensitive
Production 175 firms disclosure industry (pos. impact)
2006 quality (index; • Ownership concentration
scoring) (no impact)
2009 653 Reid and Toffel Strategic Management USA • Participation in • Shareholder resolution
Journal 524 firms the CDP target (dummy) (pos.
2006-2007 (dummy) impact)
• Shareholder resolution
target within the same
industrial field (number)
(pos. impact)
• Government regulation
target (dummy) (pos.
impact)
 41

• Government regulation
target within the same
institutional field (number)
(pos. impact)

2008 341 Stanny and Ely Corporate Social USA • Participation in • Institutional ownership (no
Responsibility and 494 firms the CDP impact)
Environmental 2006 (dummy;
Management yes/no)
 42

Table 3: Empirical-quantitative research on the carbon performance-disclosure link and vice versa
Notes: Carbon emissions represent an inverse variable of carbon performance. We recorded citation frequencies from Google Scholar on 28 Aug. 2019.

Year of # cites Journal State

Author(s) Independent variable(s) and significant
publica Sample Dependent variable(s)
results
tion Year(s)
2018 4 Giannarakis et al. Corporate Social Worldwide (Europe) • Climate change • Carbon emissions (neg. impact on
Responsibility and 215 firms disclosure disclosure)
Environmental 2014 (Climate
Management Performance
Leadership Index)
• Climate change
policy (dummy;
yes/no)
2018 12 Hassan and Business Strategy and the Worldwide • Carbon emissions • Environmental disclosure quality
Romilly Environment 9,120 firm-year (score; by Bloomberg rating)
observations (pos. impact)
2006-2014 • No hints for reversed causality
2017 14 Ott et al. Journal of Accounting Worldwide • Carbon disclosure • Carbon emission intensity (neg.
and Public Policy 11,187 firm-year (dummy; yes/no) impact)
observations • Financial performance (ROA) (no
2006-2010 impact)
• Environmental management
system (ISO certification) (no
impact)
• Existence of a CSR report (no
impact)
• Competitive industry (pos.
impact)
• CSR sensitive industry (pos.
impact)
• Industry-related market size (pos.
impact)
 43

2017b 13 Giannarakis et al. Business Strategy and the UK • Carbon disclosure • Carbon emissions (neg. impact)
Environment 119 firms quality) (score)
2014 • Climate change
policy (dummy;
yes/no)
2017a 8 Giannarakis et al. International Journal of USA • Carbon disclosure • Carbon emission intensity (neg.
Law and Management 102 firms quality (score) impact)
2009-2013 • Carbon emission dummy (bad
performance) (no impact)
2017 28 Qian and The British Accounting Worldwide • Change in carbon • Change in carbon disclosure
Schaltegger Review 766 firm-year emission intensity quality (index; score) (neg.
observations 2008- impact)
2012
2016 49 Guenther et al. Business & Society Worldwide • Carbon disclosure • Carbon emission intensity (also as
3,631 firm-year quality (index; moderator) (neg. impact)
observations score) • Stakeholder relevance
2008-2011 (government politics, general
public, media controversies,
employee quality, customer
management) (also as moderator)
(pos. impact)
• Industry affiliation (moderator)
(no impact)
• Moderator: government politics
moderate the link
2011 33 Gallego-Alvarez Journal of Cleaner Worldwide • Carbon disclosure • Carbon emission intensity (pos.
et al. Production 162 firms quality (index; impact)
2007 score) • Countries with Kyoto protocol
ratification (dummy) (pos.
impact)

2011 174 Dawkins and Journal of Business Ethics USA • Climate change • Environmental performance
Fraas 344 firms disclosure quality (rating by KLD) (pos. impact)
2006 (index; score) • Moderator: media visibility
44

(number of times in newspapers)

(media moderates the link)
 45

Table 4: Empirical-quantitative research on financial consequences for firms of carbon performance and disclosure
Notes: Carbon emissions represent an inverse variable of carbon performance. We recorded citation frequencies from Google Scholar on 28 Aug. 2019.

Year of # cites Journal State Independent variable (s): Dependent variable(s)

Author(s)
publicat Sample Carbon performance & and
ion Year(s) disclosure significant results
2019 1 Lemma et al. Business Strategy and the South Africa • Carbon disclosure • Capital cost
Environment 98 firm-year quality (index; score) (WACC) (neg.
observations impact)
2010-2015 • Moderator: high and
low carbon
emissions (dummy)
(no impact)

2018 10 Krishnamurti and Pacific-Basin Finance Journal Australia • Carbon disclosure • Stock price
Velayutham 558 firm-year quality (index; volatility (standard
observations scoring) deviation of stock
2006-2009 returns) (neg.
impact)
• Stock market
liquidity (Amihud
model) (pos.
impact)

2018 1 Schiemann and Sakhel European Accounting Review Worldwide (Europe) • Climate-related • Bid-ask-spread
717 firms physical risk (neg. impact)
2011-2013 reporting (dummy; • Moderator: firms
yes/no) under EU emissions
Trading Scheme
regulation (dummy)
(moderates the link)

2018 1 Zhou et al. Emerging Markets Finance and China • Carbon disclosure • Agency costs
Trade 830 firm-year quality (scoring; (management
 46

observations index) expense ratio; total

2010-2014 asset turnover) (neg.
impact)
• Moderator: heavily
pollution group (no
impact)
• Mediator: earnings
management
(accruals) (no
impact)
2018 2 Borghei et al. Afro-Asian Journal of Finance Australia • Carbon disclosure • Stock volatility
and Accounting 136 firms (content analysis; (neg. impact)
2009-2011 score) • Bid-ask-spread
(neg. impact)

2018 39 Jung et al. Journal of Business Ethics Australia • Carbon emissions • Cost of debt
255 firm-year (interest expense)
observations (no impact)
2009-2013 • Moderator:
Participation to
CDP (pos. impact
on debt for firms
failing to respond to
CDP)

2018 2 Ganda and Milondzo Sustainability South Africa • Carbon emission • Financial
63 firms intensity performance (ROE,
2015 ROI, ROS) (neg.
impact)

2018 2 Brouwers et al. Business Strategy and the Worldwide (Europe) • Carbon emission • Financial
Environment 2,593 firm-year intensity performance (ROA,
observations ROE, Tobin’s Q)
2005-2012 (no impact)
• Moderators: carbon
 47

cost pass through,

carbon intensive
industries (negative
impact on financial
performance if firms
are not able to pass
on carbon costs to
consumer)
2017 110 Griffin et al. Contemporary Accounting USA • Carbon emissions • Stock price (Ohlson
Research 3,460 firm-year model) (neg.
observations impact)
2006-2012
2017 69 Trumpp and Guenther Business Strategy and the Worldwide • Carbon emission • Financial
Environment 2,361 firm-year intensity performance (ROA,
observations • Waste intensity stock price)
2008-2012 • (Inverted U-shaped
(non-linear)
relationship
between intensity
and ROA; inverted
U-shaped link
between intensity
and stock price only
for manufacturing
firms)
2015b 84 Lee et al. Corporate Social Responsibility Korea • Carbon disclosure • Cumulative
and Environmental n.A. quality (score; content abnormal return
Management 2008-2009 analysis) (neg. impact)
• Moderator: high
frequency of carbon
communication
through media
(mitigates the link)
 48

2015 76 Clarkson et al. European Accounting Review Worldwide (Europe) • Carbon allowance • Market value of
843 firm-year • Carbon allocation equity (Ohlson
observations shortfall model) (no impact
2006-2009 of allowance and
negative impact of
shortfall)
• Moderator: carbon
performance,
competitive industry
(Herfindahl-
Hirschman index)
(mitigated through
moderators)

2015 29 Kim et al. Journal of Cleaner Production Korea • Carbon emission • Cost of equity
379 firms intensity (Easton and Ohlson
2007-2011 Juettner model)
(pos. impact)
• Moderator:
voluntary CSR
reporting (dummy;
yes/no); carbon
intensive industries
(link less
pronounced by
carbon industries)

2015 46 Misani and Pogutz Ecological Economics Worldwide • Carbon emissions • Financial
127 firms performance
2007-2013 (Tobin’s Q)
(inverted u-shaped
(Non-linear)
relationship)
• Moderator:
environmental
 49

performance (rating
by Asset4) (pos.
impact)

2015a 53 Lee et al. International Journal of Japan • Carbon emissions • Financial

Production Economics 362 firms • R&D expenses performance
2003-2010 (Tobin’s Q) (neg.
impact of carbon
emissions and pos.
impact of R&D
expenses)

2015 26 Lannelongue et al. Business Strategy and the Spain • Effort in • Financial
Environment 204 firms environmental performance (ROA,
2011 management ROE, profits before
(questionnaire) taxes) (no impact)
• Carbon emission
(intensity)
2015 47 Gallego-Alvarez et al. Journal of Cleaner Production Worldwide • Carbon emission • Financial
89 firms reduction performance (ROE,
2006-2008 ROA) (pos. impact
on ROE)

2015 32 Delmas et al. Organization & Environment USA • Carbon emissions • Financial
1,095 firms performance (ROA,
2004-2008 Tobin’s Q) (pos.
impact on ROA and
negative impact on
Tobin’s Q)

2014 28 Luo and Tang Pacific Accounting Review Australia • Carbon emissions • Cumulative
n.A. (direct; scope 1; abnormal returns
2011 indirect, scope 2) (after carbon tax
• Carbon disclosure enactment) (neg.
quality (index; score), impact of
 50

• emission reduction emissions)

target (dummy)
• incentives for
management of
climate-change issues
(dummy)
2014 20 Li et al. Review of Accounting and Australia • Carbon emissions- • Cost of equity
Finance 1,050 firm-year liable (dummy) (Easton model)
observations • Carbon emission (pos. impact of
2006-2010 intensity emissions-liable)
• Cost of debt
(interest expenses)
(pos. impact of
intensity)

2014 47 Wang et al. Business Strategy and the Australia • Carbon emissions • Financial
Environment 69 firms performance
2010 (Tobin’s Q) (pos.
impact)

2014 74 Saka and Oshika Sustainability Accounting, Japan • Carbon emissions • Financial
Management & Public Policy 1,094 firm-year • Carbon disclosure performance
observations (dummy) (Market value of
2006-2008 equity) (neg. impact
of carbon emissions;
pos. impact of
carbon disclosure)
• Moderator: carbon
emissions
(moderates the link)

2014 36 Gallego-Alvarez et al. Business Strategy and the Worldwide • Carbon emission • Financial
Environment 855 firms intensity performance (ROA)
2006-2009 (no impact)
• Moderator: financial
 51

crisis (moderates the

link)

2013 277 Matsumura et al. The Accounting Review USA • Carbon emissions • Financial
550 firm-year • Carbon disclosure performance
observations (dummy) (market value of
2006-2008 • Industry-specific equity) (neg. impact
carbon disclosure of carbon emissions;
pos. impact of
carbon disclosure)

2013 129 Fujii et al. Business Strategy and the Japan • Carbon emissions • Financial
Environment 758 (2,498) firm-year intensity performance (ROA,
observations • Toxic risk associated ROS, capital
2006-2008 (2001-2008) with chemical turnover) (neg.
emissions/sales impact (linear) on
ROA); no impact,
non-linear on ROS;
inverted U-shaped
(non-linear)
relationship
between toxic risks
and financial
performance)

2013 27 Chakrabarty and Wang Thunderbird International USA • Climate change • Financial
Business Review 264 firm-years mitigation (reduction; performance (Sales
observations TRI database) effectiveness (net
2001-2009 sales), product
leadership (KLD
rating), ROE) (pos.
impact on sales
effectiveness and
product leadership)
• Moderator:
 52

internationalization
(foreign sales/total
sales) (moderates
the link)

2012 20 Chen and Gao Journal of Financial and USA • Carbon emission • Cost of equity
Economic Practice 182 (117) firm-year intensity (Claus and Thomas;
observations Easton models)
2002, 2003, 2006, 2008 (pos. impact)
• Cost of debt (bond
yield to maturity
spread) (pos.
impact)

2012 19 Aggarwal and Dow The European Journal of USA • Carbon emission • Financial
Finance 230 (426) firm-year intensity performance
observations • Environmental impact (Tobin’s Q) (neg.
2009 score (EIS) impact of exposure)
(Newsweek rating)

2012 61 Nishitani and Kokubu Business Strategy and the Japan • Reduction in carbon • Financial
Environment 641 firms emissions performance
2006-2008 (sales/carbon (Tobin’s Q) (pos.
emissions) impact)
• Instrument: years of
adoption of ISO
14001 standard
(environmental
management
system)

2012 45 Hatakeda et al. Environmental Resource Japan • Carbon intensity • Financial

Economics 1,089 firm-year reduction performance (cash
observations flow after tax) (pos.
2007 impact)
 53

• Moderator:
environmental
management system
(ISO 14001
certification),
competitive industry
(Herfindahl-
Hirshman), stock
volatility, leverage
and bank loans,
large shareholders
(stock price
volatility, large
shareholders and
leverage moderate
the link)
2011 90 Kim and Lyon The B.E. Journal of Economic Worldwide • Participation in the • Cumulative
Analysis & Policy 358 firms CDP project (dummy) abnormal return (no
2006 • Firms with impact of CDP
headquarters in participation; pos.
countries with impact of Russia
ratification of the certification event)
Kyoto protocol
2011 198 Iwata and Okada Ecological Economics Japan • Carbon intensity • Financial
n.A. • Waste intensity performance (ROE,
2004-2008 ROA, ROI, ROIC,
ROS, Tobin’s Q)
(neg. impact of
carbon intensity on
ROA, ROI, ROIC
and Tobin’s Q; no
impact of waste
intensity)
 54

2011 220 Busch and Hoffmann Business & Society Worldwide • Carbon emission • Financial
174 firms intensity performance (ROA,
2007 • Carbon management ROE, Tobin’s Q)
score (index; (neg. impact of
questionnaire) intensity on Tobin’s
• Interaction between Q; pos. impact of
both management score
on ROE and
Tobin’s Q)

2010 19 Tatsuo Asian Business & Management Japan • Carbon emissions • Financial
129 firms performance (ROA)
2006 (inverted U-shaped
(non-linear)
relationship for
chemical and food
industry)

2010 11 Brzobohaty and Jansky Transitional Studies Review Czech Republic • Carbon emission • Financial
90 firms intensity performance
2004-2006 (revenues/total
assets) (neg. impact)
 55

Figure 6: Findings on empirical-quantitative research on carbon performance &

disclosure
 56

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Declaration of interests

☒ The authors declare that they have no known competing financial interests or personal relationships
that could have appeared to influence the work reported in this paper.

☐The authors declare the following financial interests/personal relationships which may be considered
as potential competing interests: