The University of Birmingham

College of Social Sciences

The Birmingham Business School

Department of Accounting and Finance

Professional Skills

(07 22676)

Précis Writing

What is the impact of voluntarily corporate environmental disclosures on the cost of equity? Do they increase or decrease the cost of equity within corporations? Some research has have been made based on French companies which will perhaps help you to see more clearly.

It is important to understand what is motivating disclosing companies to voluntarily publish environmental information? Giving a financial report to the environment is the principal way in which investors, creditors, shareholders, governments and the public at large can be informed on the performance of a company. A company’s financial performance affects its financial statement due to increasing concern of those people. Nevertheless, publishing this kind of information could also affect company performance in a negative way. On average, the environmental topics that attract the most details from companies are natural resources, pollution and recycling. Which has no effect on whether or not to share environmental information. When companies communicate environmental disclosures, they actually communicate details like company size, financial leverage and the number of financial analysts monitoring company stock (1).
Divulging environmental disclosures can also help a company’s stock price. Belkaoui determined a positive effect on the stock price of companies that engaged in communicating environmental information, in comparison with the stock price of companies undertaking no such publication efforts (2). The American market was the first that announced their stock price, followed by markets in Canada, India and then France in 2007. That same year, Comrier and Magnan observed that while environmental