This study empirically tests the influence of environmental, social and governance (ESG) disclosure on green innovation using a sample of A-share listed firms in China from 2011 to 2022. In addition, this study aims to examine the mechanism through which ESG disclosure influences green innovation.
Based on information asymmetry and legitimacy theories, the authors posit that ESG disclosure is positively associated with green innovation. This empirical study incorporates robustness tests, including alternative measurements, firm fixed-effect model, limited dependent variable models and IV-two-stage least squares regression model.
ESG disclosure facilitates firm’s green innovation. This positive effect of ESG disclosure on green innovation is more pronounced in carbon-intensive firms and firms under greater environmental pressure. In addition, firms with better ESG disclosure are more likely to receive government subsidy and increase environmental investment, which in turn fosters a higher level of green innovation.
This study documents that ESG disclosure positively affects corporate green innovation, especially for carbon-intensive firms and firms faced with stronger environmental regulation. Managers can enhance legitimacy by increasing ESG disclosure, and integrate green innovation in ESG practices to enhance the positive impact on social and environmental sustainability.
This study provides evidence on factors that affect corporate green innovation and reveals the importance of corporate ESG disclosure to the firm itself and the external environment. Firms should actively carry out ESG disclosure and green innovation activities to promote the sustainable development of organizations, society and the environment.
This study contributes to the literature by providing a novel perspective on ESG disclosure as a determinant of green innovation. It elucidates the role of ESG disclosure in shaping corporate innovation strategies. In addition, by incorporating industry heterogeneity and environmental regulation, this study offers a contextualized analysis of ESG disclosure’s impact, highlighting the institutional and regulatory conditions that moderate its effect on green innovation.
