Environmental litigation, social attention, and corporate value: Evidence from China

In recent years, climate change has increasingly attracted global attention, with more individuals, environmental organizations and other entities suing companies. Financial market stakeholders recognize this as a key risk to corporate sustainable development and value. This study aims to examine the impact of environmental litigation on corporate value. Using the event study methodology, we analyzed 135 environmental litigation filings from 2003 to 2024. Findings show that environmental litigation significantly negatively impacts corporate value, and this negative impact is more pronounced when the court makes an adverse decision. Social attention further amplifies this negative impact. Heterogeneity analysis demonstrates that carbon majors and state-owned enterprises face greater negative impacts from environmental litigation compared to non-carbon majors and non-state-owned enterprises. Additionally, litigation not only lowers the target company’s stock price but also generates spillover effects on peers, manifesting as both “shame effect” and “competition effect”. Our findings confirm that financial market stakeholders view environmental litigation and adverse decisions as risks to corporate sustainability, and we conclude that environmental litigation risks reduce corporate value.