Vera-Munoz Paper Published in RAST

Author: Lorie Marsh

Please join us in congratulating Professor Sandra Vera~Munoz, whose paper, “Climate Risk Materiality and Firm Risk", co-authored with Ella Mae Matsumura, University of Wisconsin-Madison and Rachna Prakash, University of Mississippi, has been accepted for publication in Review of Accounting Studies


Using the SASB Materiality Map to proxy for market expectations of climate risk materiality, we test whether the association between disclosing climate risk in 10-Ks and firm risk (proxied by cost of equity) varies with market expectations of climate risk materiality. We find that the market rewards (penalizes) the firms for disclosing (not disclosing) climate risk in their 10-K filings. However, the penalty for nondisclosure is twice as large when the market expects climate risk to be material as compared to when the market does not expect climate risk to be material. Our results indicate that markets use expectations of climate risk materiality to infer the credibility of managers’ climate risk disclosure decisions.