Climate disclosure and stock market manipulation.

Abstract

This study examines whether text-based climate disclosure is associated with suspected stock market manipulation. Using dataset of China's A-share listed firms from 2010 to 2021, we construct a firm-level measure of reported climate disclosure from annual reports and a suspected manipulation count from opening-price, closing-price, and continuous-trading anomalies. we find that a one-unit increase in text-based climate disclosure is associated with 0.282 more suspected manipulation episodes, equivalent to 1.91% of the sample mean. The result remains robust to alternative clustering, sample restrictions, high-dimensional fixed effects, an instrumental-variable specification, and count-model estimators. Mechanism tests indicate that climate-related disclosure increases investor attention and investor sentiment, which in turn raise the profitability of narrative-based manipulation. The effect is stronger for firms with financially experienced CEOs, greater operating pressure, less institutional investor ownership, and less liquid stocks. This study offers insights into how the financial market can be disturbed under external shocks, especially in China and other emerging markets.