Carbon emissions and earnings informativeness : evidence from Taiwan

This study analyzes the influence of carbon emissions on the well-documented positive earnings – stock price link using a sample of 2,871 Taiwanese firm-year observations from 2014–2019. While earnings remain positively associated with stock prices, we find that higher carbon emissions weaken this relation, suggesting that environmental risks impair earnings' informativeness. However, this negative effect is mitigated in firms with third-party ESG assurance and strong environmental ratings. These results are robust to various sensitivity tests. Overall, our findings reveal a novel channel through which carbon risk diminishes firm valuation and underscore the importance of credible ESG practices.