Unveiling the nexus between board quality, firm innovation and climate risk disclosure: a study of Indian companies

Abstract

Purpose This study aims to explore the association of board quality and firm innovation on climate risk disclosure in the context of large listed companies in India. It builds upon the framework developed by the stakeholder theory and the legitimacy theory to examine the association between the key variables of the study. Design/methodology/approach The climate risk disclosure is measured through content analysis of the annual reports of the respective companies. A panel data framework analyzes the relationship between board quality, firm innovation and climate risk disclosure. Findings The findings indicate a gradual increase in climate risk disclosure throughout the sample period. This study also finds that certain board characteristics and investment in innovation are significant determinants of a firm’s approach toward identifying and mitigating risks arising from rapid climate change. This study has implications for practitioners, policymakers and academicians who strive toward creating resilient and sustainable organizations. Research limitations/implications This study is relevant for practitioners as it identifies an increasing trend in the identification and reporting of climate risk disclosure in the sample firms. This would be beneficial for managers and other stakeholders of the organizations who would be interested in the mitigation of climate risk. The organizational leadership may identify key parameters of their firms, which helps them prepare against the adverse impact of climate change on business. Originality/value To the best of the authors’ knowledge, this is the first study to evaluate climate risk disclosure practices of large listed companies in India. This study highlights how large Indian companies are developing an overall approach for identifying and mitigating risks associated with rapid climate change, which has not been conducted for any economy.