Events

Mr. Rongchen Li
Ph.D. Candidate in Accounting
Accounting Division
Columbia Business School

I examine the impact of information intermediaries’ emissions estimates on firms’ emissions disclosures. In recent years, estimates of corporate emissions provided by intermediaries have proliferated. I develop an analytical framework to theorize how such estimates interact with firms’ disclosures. In my model, investors penalize firms’ emissions, and higher-emitting firms abstain from disclosure. Thus, intermediaries would underestimate firms’ emissions because their statistical models are calibrated using a self-selected sample of lower-emitting firms that choose to disclose. The model predicts that the biased emissions estimates further deter firms’ disclosures if at least some investors naively rely on these estimates. I provide empirical support for my model’s building blocks: investors’ emissions pricing, firms’ strategic disclosures, and intermediaries’ biased estimates. Next, I exploit the expansion of a major intermediary as shock to the presence of intermediary estimates. I document evidence consistent with the predicted deterrence effect of intermediaries’ estimates on firms’ emissions disclosures. Informed by my model and corroborating empirical evidence, I structurally estimate the model to explore the potential consequences of refining intermediaries’ estimates and complementary roles played by disclosure mandates.