Net-Zero Strategy Credibility and Firm Valuation in Middle Eastern Equity Markets

Corporate net-zero pledges have proliferated across the Middle East, yet whether capital markets distinguish credible decarbonization strategies from symbolic ones remains unexamined in energy-exporting emerging markets, a gap this study addresses. This omission matters because the six Gulf Cooperation Council (GCC) economies in our sample face acute stranded-asset exposure amid national diversification programmes such as Saudi Arabia’s Vision 2030 and the UAE’s Operation 300bn. We test whether net-zero credibility is associated with firm valuation among 167 listed firms across seven Middle Eastern countries (2020–2025, 1002 firm-year observations), constructing a five-dimension Credibility Index (pathway specificity, capex alignment, verification, policy compliance, and track record) and applying event-study, pooled panel regression, mediation, moderation, and firm/year fixed-effects analysis. The index is internally consistent (Cronbach’s α = 0.92) and its estimated valuation association is invariant to equal, alternative and leave-one-out weighting schemes. Credibility is positively associated with all four valuation multiples (p < 0.001, firm-clustered standard errors); a one-standard-deviation increase corresponds to a 0.133 increase in Tobin’s Q (95% CI [0.116, 0.149]). High-credibility announcements earn cumulative abnormal returns 5.95 percentage points above low-credibility announcements over (−5, +5) trading days (95% CI [4.79, 7.11]), a gap robust to nonparametric tests, placebo dates and strictly pre-announcement credibility scoring. The association survives firm and year fixed effects (within-firm β = 0.119 per SD, p < 0.001). No moderator—foreign ESG fund, domestic institutional or sovereign wealth fund ownership, regulatory stringency, carbon intensity or financial health—reaches significance after correction for multiple testing, so we find no evidence of investor-type or jurisdictional heterogeneity in this sample. To the authors’ knowledge, this is the first Middle East-calibrated, capex-verified credibility index and the first evidence on the pricing of transition authenticity across GCC markets and Egypt, informing regulators, boards, and ESG investors.