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We study the motivations behind and consequences of firms disclosing carbon information. Specifically, we explain the bidirectional relationship between carbon disclosure and carbon performance and examine whether carbon disclosure is used as a legitimizing tool or a governance tool. We analyze carbon emissions and disclosure data from 2012 to 2015 for a sample of S&P 500 companies. After addressing issues of endogeneity, our findings support legitimacy theory and suggest that firms tend to greenwash carbon information and use carbon disclosure as a legitimizing tool. In particular, managers strategically select particular types of carbon information to disclose to the public. Our findings also indicate that firms in lowcarbon sectors tend to use disclosure as a governance tool rather than a legitimizing tool, suggesting that firms in high carbon intensity sectors are likely to face serious legitimacy anxiety, and have stronger reasons to manage their green image. Implications of our empirical evidence for managers, investors, and policymakers are explored.

Based on an international sample, this study examines the association between corporate carbon assurance and carbon disclosure. We find that companies that adopt carbon assurance tend to have better carbon disclosure quality than their unassured peers. Cross‐sectional analyses demonstrate that the positive relationship is stronger in stakeholder‐oriented countries. We also document that carbon assurance plays a substitutive role for country‐level carbon regulation and social trust. Further analyses suggest that carbon assurance has differential impacts on specific types of carbon disclosure and the quality of carbon disclosure increases with the percentage of reported emissions assured and the level of carbon assurance.

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