Does Low-Carbon Transition Disclosure Alleviate Stock Price Crash Risks? Evidence from China

We examine whether firms’ low-carbon transition disclosure (LCTD) is associated with stock price crash risk in an emerging-market context. Using a sample of Chinese A-share firms in pollution-intensive industries from 2008 to 2020, we construct a firm-level measure of LCTD based on the MD&A sections of annual reports. This measure captures firm-specific transition-related communication beyond broad ESG classifications. We find that firms with higher levels of LCTD exhibit significantly lower subsequent stock price crash risk. The result is robust to alternative measures and model specifications. Further analyses show that the negative association is more pronounced for firms with greater media coverage and analyst following, consistent with disclosure reducing information asymmetry and limiting the accumulation of undisclosed negative information. Overall, the findings suggest that credible transition-related disclosure is associated with greater market stability during the low-carbon transition.