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How Does Board Expertise Influence the Effect of Climate Change Estimate Uncertainties on Investor Judgment?

Tracks
Crystal 2
Tuesday, July 2, 2024
9:00 AM - 9:15 AM

Presenter

Mrs Dani Puspitasari
Phd Student
Monash University

How Does Board Expertise Influence the Effect of Climate Change Estimate Uncertainties on Investor Judgment?

Abstract

With investors growing demand for climate-related financial disclosures (CFD), regulators are requiring companies to disclose CFD quantitatively. Further, due to the reliability concerns on climate-related information, regulators propose requirements for companies to disclose the boards expertise in climate-related issues. We experimentally examine whether and how the precision of the quantifiable CFD (range vs. point values) and the boards expertise in climate-related issues jointly influence investors willingness to invest. Drawing on source credibility theory, we predict and find that in the presence of the boards expertise, investors willingness to invest is significantly higher when the quantifiable CFD is presented in point rather than range values. However, in the absence of the boards expertise, investors willingness to invest is marginally higher when the quantifiable CFD is presented in range rather than point values. We find that when point rather than range values are used in the quantifiable CFD, the presence of the boards expertise significantly enhances investors confidence in the management estimate and, in turn, increases perceived disclosure credibility, resulting in a greater willingness to invest. Our study has important implications for regulators regarding the effects of the precision of the quantifiable CFD, given the varying requirements on the precision of the quantifiable CFD, and how the disclosure of the boards expertise in climate-related issues may have consequences on investors decision-making.

Biography


Chair

Jennifer Zhao
Phd Candidate
The University of Western Australia

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