Confession and greenwashing: the impact of water information disclosure on firm value

Abstract

Water pollution has become a serious problem in recent years, and firms are one of the main culprits for this environmental issue. Encouraging companies to improve water management behavior is necessary to protect water resources. Based on panel data of Chinese A-share listed companies in water-sensitive industries, this study used text analysis techniques to study the impact of corporate water information disclosure on pollutant emissions, strategy on firm value, and the U-shaped moderating role of local governments’ environmental regulation. The results show that (1) an increase in the amount of emission information texts to confess the water status can help enhance firm value. (2) The increase in the amount of strategic information texts, both the tone of emission, and strategic information texts have negative impacts on firm value, which help enterprises greenwash. Further analyses find a U-shaped moderating effect of governments’ environmental regulation on the relationships between emission information disclosure, strategic information disclosure and firm value, and varies under the different ISO14001 certification situations and life cycles. This research explains the effectiveness of corporate water information disclosure and the influence of governments’ environmental regulation, which plays a vital role in promoting firms to improve their environmental behaviors, reduce water pollution, and further achieve green development.

The divergence and driving factors of corporate environmental information disclosure in China

“…As enterprises decide the content of information disclosure by themselves, some enterprises selectively disclose beneficial information, deliberately conceal negative information, and avoid disclosure of information that is not conducive to building an image of corporate environmental protection (Zhang 2022. When some enterprises fail to achieve the expected green performance, they often adopt 'strategic' environmental speculative behavior -'greenwashing' (Huang 2023), such as exaggerating or concealing EID (Xie et al 2023, Zhang et al 2023a. Scholars have begun to innovate the measurement of EID in their research.…”