Cheap Talk or Signaling? The Determinants and Consequences of Unfaithful Environmental Reporting

Irina Luneva, Accounting, The Wharton School

Abstract: The goal of the project is to identify cheap talk and faithful signaling in environmental reports issued by the U.S. largest firms and understand the determinants and consequences of cheap talk about firms’ climate responsibility. The first step is to create a compound measure of a degree of cheap talk that is present in firms’ environmental reports. The second step is to examine how the presence of cheap talk in environmental reports is affected by the level of mass media scrutiny and what are the implications of cheap talk for market asymmetry and real effects – firm peers’ learning from the firms’ environmental reports.