Carbon Liquidity

50 Pages Posted: 11 Oct 2021

See all articles by Ryan Riordan

Ryan Riordan

Queen's University - Smith School of Business

Martin Nerlinger

University of St. Gallen - School of Finance

Date Written: October 8, 2021

Abstract

We study the impact of disclosing greenhouse gas emissions CO2 on the liquidity of firms’ equity. We find that firms that emit more carbon are less liquid. However, firms that disclose emissions have lower bid-ask spreads than firms that do not. This is partially because when firms first disclose their emissions their bid-ask spreads decrease by roughly 13%. These results hold for high information asymmetry firms, for high and low carbon intensity firms, and for early and late disclosing firms. These results should encourage regulators and firms to move quickly towards more, more robust, and more granular environmental disclosures.

Keywords: Emissions, Liquidity, Disclosure

Suggested Citation

Riordan, Ryan and Nerlinger, Martin, Carbon Liquidity (October 8, 2021). Available at SSRN: https://ssrn.com/abstract=3938563 or http://dx.doi.org/10.2139/ssrn.3938563

Ryan Riordan (Contact Author)

Queen's University - Smith School of Business ( email )

Smith School of Business, Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Martin Nerlinger

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St. Gallen, 9000
Switzerland

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