Topic：Corporate environmental risk exposure and analyst behaviour
Presenter：Yue Li, Associate Professor, University of Toronto
Time：June 29, 2012（Friday）2:30PM
Venue：Room 501, Jiageng Bld 2
Chair：Jun Ruan, assistant professor in finance, IFAS
Abstract：
This study examines whether corporate environmental risk exposure affects analyst
behaviour. We hypothesize that analysts use the Toxics Release Inventory (TRI) data from the U.S. Environmental Protection Agency (EPA) to assess firms’ environmental risk exposure relative to firms’ industry peers and hence firms’ future earnings prospects. Using a large sample of U.S. public companies from 1997 to 2009, we find that firms’ environmental risk exposure is associated with lower accuracy and higher dispersion in analyst earnings forecasts. Changes in firms’ environmental risk exposure are positively associated with the likelihood that analysts revise their stock recommendations following the release of the TRI data by the EPA. In addition, analysts are more likely to revise their stock recommendations of a firm downward if the firm experiences an increase in their environmental risk exposures, and vice versa. As expected, our findings are more prominent for firms operating in high-polluting sectors. Overall, the findings are consistent with analysts using complex toxic emissions data released by the EPA in their analysis and stock recommendations and shed light on the mechanism through which corporate environmental risk exposure is incorporated into stock prices.
Presenter Introduction：
Prof. Li Yue is Fellow of the Michael Lee-Chin Family Institute for Corporate Citizenship and Associate Professor in Rotman School of Management at University of Toronto. He got his PhD, MBA and B. Sc. From Queen's University, University of Toronto and Huazhong University of Science and Technology respectively. He teaches courses in managerial accounting, management control, financial statement analysis, and consolidation. Research interests include environmental accounting, corporate governance, voluntary disclosures and capital markets, and IPO valuation. He has publications in top journals such as Journal of Accounting and Public Policy, Accounting Review and Journal of Accounting, Auditing, and Finance, etc.