THE INTERPLAY BETWEEN ENVIRONMENTAL DISCLOSURE, CORPORATE GOVERNANCE, AND GREEN INNOVATION IN ENHANCING CORPORATE VALUE

Abstract

This study examines the intricate relationships among the quality of environmental information disclosure, corporate governance, corporate value, and green innovation capabilities within the context of companies listed on the Shanghai and Shenzhen stock exchanges in China. The objective of this paper is to elucidate how transparency in environmental reporting and robust governance structures influence a firm's market valuation and inclination towards green innovation, using fixed effect models applied to 4,932 organizations that engaged in environmental reporting between 2008 and 2022. The research delineates the connection between corporate governance, corporate value, and green innovation capabilities, highlighting that effective governance is pivotal in enhancing corporate sustainability performance and fostering green innovation. Additionally, the study finds a positive correlation between environmental disclosure quality and corporate value, suggesting that investors value firms' commitment to environmental issues and accordingly assign higher valuations to such companies. However, it identifies a nuanced trade-off between the quality of environmental disclosure and investment in green innovation capabilities, indicating that while high-quality disclosure is beneficial, it may restrict a company's capacity to invest in innovation. This research contributes to the existing literature on corporate sustainability by clearly defining governance and transparency as strategic factors for enhancing corporate performance and sustainability. It provides valuable insights for corporate managers and policymakers, offering guidance for fostering positive changes that benefit both corporations and the environment.