Do Circular Economy Strategies Create Value? Evidence From the United States

ABSTRACT This study provides the first large‐scale, longitudinal evidence on how capital markets interpret circular economy (CE) strategies for US firms. Using more than 7500 ESG reports of US firms (1998–2023), we map the disclosure of CE practices in the United States and examine their valuation effects. We show that references to CE terminology surged after the Paris Agreement, whereas detailed disclosures of concrete strategies declined, suggesting a rhetorical rather than substantive turn. We further show that CE communication is, on average, negatively associated with Tobin's Q. However, disaggregating the 10R framework uncovers substantial heterogeneity: Medium‐loop strategies reduce firm value, whereas short‐ and long‐loop strategies have no significant effect. We further identify four mechanisms, such as financial slack, greenwashing, stock liquidity, and information asymmetry, that condition these relationships. By integrating granular strategy‐level evidence with theoretically grounded mechanisms, our study clarifies prior contradictory findings on the financial impact of CE on firm performance and advances understanding of when, why, and how CE strategies are valued by capital markets.