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From Policy Mandates to Market Signals: Causal and Dynamic Effects of Carbon Information Disclosure on Firm Value

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  • Runyu Liu

    (Graduate School of Business, Universiti Kebangsaan Malaysia, Bangi 43600, Malaysia
    School of Accounting, Nanjing Audit University Jinshen College, Nanjing 210023, China)

  • Mara Ridhuan Che Abdul Rahman

    (Graduate School of Business, Universiti Kebangsaan Malaysia, Bangi 43600, Malaysia)

  • Ainul Huda Jamil

    (Graduate School of Business, Universiti Kebangsaan Malaysia, Bangi 43600, Malaysia)

Abstract

This study examines the causal and dynamic effects of carbon information disclosure on firm value, using a policy-driven setting in China’s carbon-intensive industries. In 2018, the Ministry of Ecology and Environment implemented a regulatory policy requiring internal carbon accounting and third-party verification for carbon-intensive enterprises, without mandating public disclosure. This exogenous policy shock offers a quasi-natural experiment to investigate how firms in carbon-intensive industries respond to environmental mandates through voluntary disclosure and how such disclosure affects their market valuation. Employing a difference-in-differences framework combined with two-stage least squares estimation, we identify a significant increase in carbon information disclosure following the policy intervention. This disclosure leads to a positive and growing effect on firm value, particularly when sustained over multiple years. Moreover, the valuation effect is moderated by regional environmental regulation: firms in areas with lower enforcement intensity benefit more from disclosure, as the signal is perceived to be more voluntary and credible. These findings provide robust causal evidence on the role of carbon information disclosure in shaping market outcomes under regulatory pressure. The study contributes to the literature on environmental regulation and corporate financial behavior in emerging markets.

Suggested Citation

  • Runyu Liu & Mara Ridhuan Che Abdul Rahman & Ainul Huda Jamil, 2025. "From Policy Mandates to Market Signals: Causal and Dynamic Effects of Carbon Information Disclosure on Firm Value," IJFS, MDPI, vol. 13(2), pages 1-33, June.
    • Handle: RePEc:gam:jijfss:v:13:y:2025:i:2:p:98-:d:1670681
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    References listed on IDEAS

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    1. Gary Peters & Andrea Romi, 2014. "Does the Voluntary Adoption of Corporate Governance Mechanisms Improve Environmental Risk Disclosures? Evidence from Greenhouse Gas Emission Accounting," Journal of Business Ethics, Springer, vol. 125(4), pages 637-666, December.
    2. Zahra Borghei, 2021. "Carbon disclosure: a systematic literature review," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(4), pages 5255-5280, December.
    3. Danny Zhao‐Xiang Huang, 2022. "Environmental, social and governance factors and assessing firm value: valuation, signalling and stakeholder perspectives," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(S1), pages 1983-2010, April.
    4. Nadia Ameli & Paul Drummond & Alexander Bisaro & Michael Grubb & Hugues Chenet, 2020. "Climate finance and disclosure for institutional investors: why transparency is not enough," Climatic Change, Springer, vol. 160(4), pages 565-589, June.
    5. Bu, Caiqi & Zhang, Kaixia & Shi, Daqian & Wang, Shuyu, 2022. "Does environmental information disclosure improve energy efficiency?," Energy Policy, Elsevier, vol. 164(C).
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