The Moderating Role of Environmental Information Disclosure on the Impact of Environment Protection Investment on Firm Value

Abstract

The presence of a link between corporate environmental protection investment and firm value is essential for enterprises to have incentives to invest in environmental protection by themselves. How environmental information disclosure affects the relationship between environmental protection investment and firm value is also an issue worth exploring. This paper uses the regression model with the industry and time-fixed effects to examine the relationship between environmental protection investment and firm value of China’s A-share heavily and non-heavily polluting enterprises from 2010–2020, as well as the moderating role of environmental information disclosure. The empirical results show that (1) there is a significant U-shaped relationship between environmental protection investment and firm value, and (2) corporate environmental information disclosure has a moderating effect. Specifically, it has an “amplifying” effect on the relationship between environmental protection investment and firm value. If a company’s environmental protection investment is insufficient, overly transparent corporate environmental disclosure will exacerbate the decline in firm value. Once environmental protection investment is up to standard, adequate disclosure can contribute to an increase in firm value.