Beyond compliance: when does environmental disclosure become a value-adding strategy for firms?

Using panel data from Chinese listed firms from 2012 to 2023, we find that environmental information disclosure (EID) is associated with lower firm value. This adverse effect is primarily attributable to the negative implications of information on pollution and environmental non-compliance, the potential risk of opportunistic greenwashing behaviour, and information asymmetry due to non-standardized and inconsistent disclosure practices in China. The results remain robust to alternative specifications and endogeneity tests. In addition, the government’s environmental regulations and financial support significantly moderate the observed adverse effect. Furthermore, we find that active stakeholder engagement and distinct corporate characteristics (i.e. real green commitments) help to align EID with firm value.