Environmental information provisions and response of the market: Empirical analysis of PRTRs in Japan

To explore how information gives firms an incentive to improve environmental performance, we test: (1) whether the financial market values the disclosure of information about the release and transfer of toxic chemical substances; (2) whether market valuation affects an incentive of the firms to reduce their risk and (3) whether the firms with higher releases and transfers have an incentive to reduce their risk even without the market valuation. We find that the Japanese financial market does not value the risk but that, even without market valuation, the firms have an incentive to reduce it.