Third Party Environmental Disclosure and Firm’s Green Innovation: Evidence from a Natural Experiment in China

ABSTRACT

This study examines whether third party environmental disclosure affect green innovation at the firm-level. We find that environmental disclosure promotes Chinese companies to carry out green innovations. We further demonstrate that environmental disclosure has a long-term positive impact on green innovation of companies. Our findings are robust to alternative measures and different model specifications. In addition, we show that the relationship between environmental disclosure and green innovation of companies is moderated by the stakeholder attention, company’s location, company’s ownership, company’s industry and financing constraints. Overall, our results provide clear policy implications by revealing that third party environmental disclosure can be used as a substitute for environmental regulations at this stage.

KEYWORDS:

• Third party environmental disclosure
• green innovation
• difference-in-differences model

Acknowledgments

We appreciate the insightful comments and suggestions of seminar participants at Wuhan University and Zhongnan University of Economics and Law. We acknowedege the financial support from the Major Project of Soft Science Research Plan of Zhejiang Province Science and Technology Plan Projects (grant no. 2019C25029) and Philosophy and Social Science Program of Zhejiang Province (grant no. 20NDJC331YBM). All errors and omissions are our own.

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by the Philosophy and Social Science Program of Zhejiang Province [20NDJC331YBM]; Major Project of Soft Science Research Plan of Zhejiang Province Science and Technology Plan Projects [2019C25029].