The Effect of ESG Disclosure on Firm Value: An Empirical Evidence from Chinese Listed Companies

Abstract

The purpose of this paper is to investigate the effect of environmental, social, and governance (ESG) disclosure on the firm value of Chinese listed companies. The sample consists of 6,575 firm-year observations from the years 2011 to 2021, representing 1,024 firms listed in China. Using a large panel dataset, this study reveals a positive effect of ESG disclosure on firm value (Tobin's Q), while no significant effect is observed on firm value (ROE). It highlights the need for companies to embrace ESG trends, incorporate ESG concepts into strategic decision-making, practice sustainable development, and prioritize stakeholder interests, ultimately contributing to China's pursuit of high-quality and high-speed economic development. This paper makes two significant contributions to the ESG literature: firstly, it provides a detailed explanation of the relationship between ESG disclosure and firm value using agency theory and stakeholder theory, and secondly, it offers essential implications for the government to establish a more comprehensive ESG information disclosure system and implement standardized reporting guidelines.