Does Corporate Water Performance Matter to Investors?

This paper investigates whether corporate water performance matters to investors, using water consumption, withdrawals, and discharge as three proxies of performance. Based on a sample of 2141 US firm‐year observations with available water data in the CDP annual surveys over 2014–2019, we find that poor corporate water performance is consistently associated with lower market value. This valuation penalty is weaker among firms that voluntarily disclose their water performance data to the CDP, but stronger among firms with a dedicated CSR committee on the board. Our results are robust to potential endogeneity issues. Overall, our findings suggest that investors reward sound water management and penalize weak practices more heavily when governance structures raise expectations for environmental stewardship. The study offers policy‐relevant insights by highlighting the financial benefits of transparent water reporting and contributes to the emerging literature by showing that water stewardship is a value‐relevant corporate strategy.