Environmental, social, and governance disclosure and stock valuation

This paper examines the causal effect of ESG disclosure transparency on stock valuation of Chinese listed companies, distinguishing ESG disclosure from the ESG performance scores commonly used in prior studies. Exploiting the first-time release of Bloomberg’s ESG disclosure scores as an exogenous information shock, we employ a staggered difference-in-differences (DID) model on non-financial listed firms from 2009 to 2023. Our results show that ESG disclosure significantly improves stock valuation by reducing information asymmetry. To strengthen causal identification, we complement the estimates with the Callaway-Sant’Anna estimator and a stacked DID design, and the results are robust across these specifications. Heterogeneity analysis reveals that the valuation effect is more pronounced for firms with greater ESG investor participation, analyst attention, less negative media coverage, tighter financing constraints, and executive financial expertise. ESG disclosure improves valuation by obtaining external support, easing financing costs, and alleviating agency problems.