Standardized Sustainability Reporting, ESG Performance, and Market-Based Valuation in Chinese Listed Firms

This study examines the tension between “substance” and “form” in standardized sustainability reporting within an emerging market context. Using 21,964 firm-year observations from Chinese A-share listed companies (2018–2023), we investigate whether the adoption of the Global Reporting Initiative (GRI) framework enhances substantive Environmental, Social, and Governance (ESG) and creates firm value. While baseline regressions suggest a positive link between GRI and ESG performance, rigorously applying Propensity Score Matching (PSM) reveals a critical nuance: the effect of mere framework adoption attenuates after controlling for selection bias, whereas independent assurance remains a robust driver of substantive governance quality. Furthermore, mediation analysis using bootstrap resampling documents a distinct “Labeling Effect”: GRI adoption directly enhances market valuation (Tobin’s Q), yet the indirect path via ESG scores is statistically insignificant. This indicates that investors utilize GRI as a heuristic signal of legitimacy rather than pricing granular performance metrics. We also identify a “Valuation Latency”, where substantive ESG improvements significantly boost operational profitability (ROA) but are not yet fully incorporated into stock prices. Heterogeneity analysis shows these effects are stronger for non-state-owned enterprises (Non-SOEs), supporting the view that private firms leverage standardized reporting and verification to mitigate legitimacy deficits. These findings provide empirical evidence for regulators and investors to distinguish between the “label” of adoption and the “substance” of verification.