“Visible hand” and “invisible hand”: The impact of market-driven environmental regulation on corporate carbon information disclosure

Abstract

In theory, carbon information disclosure (CID) is meant to enhance corporate economic returns during carbon reduction. Unfortunately, in China, CID currently remains insufficient under mandatory-driven environment regulations. In contrast, as a market-driven environment regulation, carbon emission trading (CET) has proven effective in improving both corporate decarbonization outcomes and economic performance. However, whether CET can help promote CID currently remains unclear. Taking A-share listed enterprises in China as research samples, using data spanning the period from 2011 to 2022, this study estimates the impact of CET on CID through the difference-in-differences (DID) method. The findings reveal that: (1) CET significantly enhances corporate CID, both in terms of carbon information disclosure behavior (CIDB) and carbon information disclosure quality (CIDQ). (2) Also, CET facilitates CID by promoting green technological innovation and attracting analysts' attention. (3) Government environmental attention positively moderates improvements in CIDQ. (4) Treatment effects exhibit heterogeneity. Specifically, the effects are more pronounced in large, non-bottleneck enterprises, labor-intensive industries, and regions with advanced digital financial inclusion. The study's results remain robust across parallel trend tests, propensity score matching-difference-in-differences (PSM-DID), counterfactual analyses, and placebo tests. These findings contribute to the theoretical understanding of market-driven environmental regulations and provide policymakers with empirical evidence to optimize CET implementation and enhance CID promotion strategies.