Investigating Disclosure Costs: The Case of the Carbon Disclosure Project

Decisions by firms to prepare private information and to publicly disclose this information are key issues in disclosure research. The Carbon Disclosure Project (CDP) provides a unique setting that allows two components of disclosure costs to be distinguished: preparation costs and proprietary costs. We apply a sequential logit approach to analyze a panel dataset that contains 11,062 firm-year observations across 59 countries from 2006 to 2010. Our findings demonstrate how the established determinants of disclosure costs capture both types of disclosure costs. We find that preparation costs are related to the available financial resources and the existence of a certified environmental management system. We also find that proprietary costs are associated with the nature of the competitive environment and the deviation of a firm’s environmental performance from its industry peers. Finally, we provide evidence that the response decision, but not the publication decision, is associated with higher selling, general and administrative expenses.