BEYOND CERTIFICATION: RETHINKING THE SUSTAINABILITY DISCLOSURE–PERFORMANCE LINK IN CHINESE HEAVILY POLLUTING FIRMS

The intersection of sustainability disclosure, green innovation, and financial performance represents a critical domain for understanding how firms, particularly those in heavily polluting sectors, reconcile environmental responsibility with economic objectives. This study investigates how ESG disclosure influences financial performance through green innovation efficiency, considering financing constraints as a moderating factor and environmental certification as a grouping variable. Using a balanced panel of 1,219 Chinese listed firms from 2010 to 2023 (3,832 certified and 5,467 non-certified firm-year observations), the analysis employs panel regression models, mediation-moderation tests, and robustness diagnostics. Results reveal that ESG disclosure significantly enhances financial performance via green innovation efficiency, while financing constraints weaken this indirect effect. Notably, the effect is not significantly different between environmentally certified and non-certified firms, challenging the assumed signaling advantage of certification. These findings highlight that while disclosure and innovation remain central to financial gains, certification alone may not differentiate firm outcomes. The study underscores the need for substantive sustainability practices beyond formal certification to strengthen both environmental and financial performance.