Leveraging Environmental Regulation: How Green Innovation Moderates the Relationship Between Carbon Information Disclosure and Firm Value

Abstract

As global concerns over climate change intensify, carbon information disclosure has emerged as a critical factor influencing firm value. However, the relationship between carbon information disclosure and firm value remains inconclusive in the existing literature, particularly within the context of China’s evolving environmental policies. This study investigates the impact of carbon information disclosure on firm value while examining the moderating role of green innovation and the moderating moderated effect of environmental regulation. Drawing on stakeholder theory, resource-based theory, and institutional theory, this study constructs a comprehensive research framework and employs panel data regression analysis on a sample of 1753 firm ten-year observations from A-share listed companies in China between 2013 and 2022. The results reveal that carbon information disclosure significantly enhances firm value, and green innovation positively moderates this relationship. Furthermore, environmental regulation strengthens the moderating effect of green innovation, acting as a leverage effect that amplifies the financial benefits of carbon information disclosure. These findings highlight the importance of integrating regulatory policies with corporate sustainability strategies. This study contributes to the literature by providing empirical evidence on the synergistic effects of carbon information disclosure, green innovation, and environmental regulation, offering insights for sustainable corporate development.

1. Introduction

Climate change has become one of the most pressing global challenges, with greenhouse gas emissions, particularly carbon dioxide, widely recognized as the primary driver of global warming. In response, international frameworks such as the UNFCCC, Kyoto Protocol, and Paris Agreement have established legally binding commitments to mitigate emissions, prompting governments worldwide to strengthen environmental regulations and implement stricter sustainability policies [1,2,3]. These regulatory measures have compelled firms to integrate carbon management strategies into their business operations, thereby increasing corporate attention to carbon information disclosure as a critical mechanism for regulatory compliance and environmental risk management [4].

In recent years, carbon information disclosure has gained increasing prominence as a strategic mechanism to enhance corporate transparency, improve stakeholder engagement, and align with sustainability expectations. The carbon information disclosure project (CDP) reported that by 2022, over 14,000 firms globally had disclosed environmental information, covering more than 64% of the global market capitalization [5,6]. Transparent carbon information disclosure enables firms to better manage their environmental footprint, increase investor confidence, and strengthen market positioning. Empirical evidence suggests that carbon information disclosure positively influences firm value by reducing investor uncertainty, improving corporate reputation, and lowering financing costs [7,8,9].

However, the impact of carbon information disclosure on firm value remains inconclusive. Some studies highlight its financial benefits, linking transparency in carbon reporting to higher shareholder returns and improved financial performance [10,11]. In contrast, other studies suggest that the financial benefits of carbon information disclosure may be offset by increased compliance costs, market skepticism, and the risk of regulatory penalties, particularly in developing economies where environmental regulations are evolving [12,13]. This divergence in findings underscores the need for further empirical research, particularly in China, where information asymmetry and inconsistent regulatory enforcement may affect the relationship between carbon information disclosure and firm value.

In addition to carbon information disclosure, green innovation has emerged as a crucial factor in advancing corporate sustainability and enhancing firm performance. Green innovation refers to technological advancements, product improvements, and process innovations that contribute to environmental sustainability while reducing resource consumption and emissions [14]. By fostering energy efficiency, minimizing pollution, and optimizing resource use, green innovation can strengthen the positive impact of carbon information disclosure on firm value [15].

Despite its potential benefits, the role of green innovation in this relationship remains uncertain. Implementing green innovation requires significant investment, technological expertise, and long development cycles, which may pose financial and strategic risks [16,17]. As firms weigh the costs and benefits of green innovation, it is crucial to examine whether its role in moderating the relationship between carbon information disclosure and firm value is always positive or whether certain external conditions, such as policy support and industry characteristics, influence its effectiveness.

Beyond carbon information disclosure and green innovation, environmental regulation serves as a critical external force shaping corporate environmental strategies. Governments worldwide, particularly in emerging economies like China, have imposed stricter environmental policies to ensure compliance with sustainability goals and drive the transition toward low-carbon economies. In China, the Environmental Protection Tax Law (2018) and the “1 + N” policy framework have introduced mandatory carbon information disclosure requirements and financial penalties for non-compliance [18,19]. These regulations have exerted pressure on firms to enhance transparency, adopt cleaner production methods, and invest in green technologies to meet national carbon neutrality goals [20,21].

Environmental regulation is often perceived as a double-edged sword: while it incentivizes firms to improve carbon information disclosure and green innovation, it may also impose financial constraints and operational burdens [15,22]. A key question remains whether environmental regulation amplifies the role of green innovation in strengthening the impact of carbon information disclosure on firm value or whether it creates financial trade-offs that limit its effectiveness. This study seeks to address this gap by investigating whether environmental regulation positively moderates the moderating effect of green innovation, thereby reinforcing the value relevance of carbon information disclosure.

To achieve this objective, this study employs panel data regression analysis based on a sample of 1753 firm ten-year observations from A-share listed companies in China between 2013 and 2022. Carbon information disclosure is measured using a text-mining approach, while green innovation and environmental regulation indicators are constructed from patent data and government environmental investment ratios, respectively. The empirical analysis is conducted using STATA 17.0 to ensure robustness and reliability. This dataset provides a comprehensive view of corporate sustainability behavior in China and allows for an in-depth examination of the interactions between regulatory policies, innovation strategies, and corporate transparency.

Despite the growing emphasis on sustainability in corporate decision-making, the interplay between carbon information disclosure, green innovation, and environmental regulation in shaping firm value remains underexplored. Existing studies have largely examined these factors in isolation, failing to account for their interactive effects within different regulatory and market contexts [12,23]. Addressing these research gaps is crucial for advancing academic understanding, shaping policy development, and informing corporate sustainability strategies.

This study contributes to the literature in several ways. First, it provides empirical evidence on the relationship between carbon information disclosure and firm value, offering new insights into the financial implications of sustainability practices. Second, it advances theoretical understanding by examining the moderating role of green innovation, demonstrating how corporate technological capabilities can amplify the benefits of environmental transparency. Third, it extends prior research by exploring the moderating moderated effect of environmental regulation, highlighting how policy interventions shape the effectiveness of corporate sustainability initiatives. Fourth, by leveraging a large dataset of A-share listed firms in China, this study provides robust empirical evidence that enhances the generalizability of its findings. Finally, this study offers practical implications for policymakers, investors, and corporate managers by underscoring the importance of integrating regulatory frameworks with corporate sustainability strategies to optimize firm value.

The rest of this paper is structured as follows: Section 2 presents the literature review and hypotheses development; Section 3 describes the conceptual framework and methodology; Section 4 provides the empirical results; Section 5 provides the discussion of the findings; and Section 6 provides the conclusion of this study.

2. Literature Review and Hypotheses Development

2.1. Carbon Information Disclosure and Firm Value

Stakeholder theory provides a robust theoretical foundation for understanding the relationship between carbon information disclosure and firm value. Firms operate within a network of stakeholders, including investors, customers, employees, regulatory bodies, and society at large, whose expectations and interests must be addressed to maintain legitimacy and achieve long-term success [24]. Transparent carbon information disclosure aligns with stakeholder expectations, reinforcing corporate accountability, enhancing reputation, and ultimately contributing to firm value [25].

The existing research has demonstrated that carbon information disclosure can positively influence firm value through multiple pathways. Studies have shown that carbon information disclosure enhances a firm’s reputation by signaling a commitment to sustainability, fostering a positive corporate image, and strengthening consumer and stakeholder trust [26]. It strengthens competitive advantage by differentiating firms in the marketplace, encouraging resource-efficient practices, and ensuring compliance with environmental regulations, thereby reducing legal and operational risks [27]. Additionally, firms with strong carbon information disclosure practices tend to develop more sustainable business models, integrating energy-efficient processes and resource optimization, which can lead to cost savings and long-term competitive resilience. Compliance with stringent environmental regulations through effective disclosure further reduces the likelihood of legal and reputational risks, strengthening a firm’s position in the industry.

It improves financial stability by demonstrating sound risk management strategies, reassuring investors and creditors, and facilitating access to sustainability-linked financial instruments, such as green bonds and low-interest credit lines [28]. Firms with clear carbon information disclosure policies often gain better access to funding opportunities, reducing financial uncertainty and enhancing stability. Meeting stakeholder expectations through transparency in environmental impact reporting enhances firms’ credibility and long-term relationships with key market participants [29]. Carbon information disclosure attracts investor interest by reducing information asymmetry, increasing confidence in a firm’s risk management strategies, and aligning with ESG-focused investment preferences. Investors often perceive firms with strong environmental disclosure as lower-risk investments, leading to a lower required rate of return [30]. This helps lower the cost of capital as environmentally responsible firms secure more favorable loan conditions and reduced financing costs. When firms openly communicate their environmental impact and climate strategies, they build investor trust, increasing capital inflow and improving stock performance [31]. Additionally, many institutional investors and asset managers now integrate ESG criteria into their investment decisions, favoring firms with transparent carbon information disclosure. This increased demand can drive up share prices, enhance market valuation [32], and provide firms with a broader range of funding opportunities at more favorable terms. These benefits suggest that carbon information disclosure can create tangible economic advantages for firms by reducing stakeholder uncertainty, enhancing trust, and fostering financial resilience, ultimately contributing to sustained long-term growth.

However, some scholars have highlighted potential drawbacks of carbon information disclosure. Increased transparency may expose firms to additional compliance costs, regulatory scrutiny, and potential competitive disadvantages [33]. For example, firms in pollution-intensive industries may face heightened financial burdens due to stricter regulatory enforcement, while others may experience minimal benefits if their industry lacks strong sustainability expectations. Heightened transparency may lead to negative market responses if stakeholders perceive disclosed environmental risks as liabilities [34]. Moreover, some researchers found that the impact of carbon information disclosure on firm value is not universally positive, suggesting that the effectiveness of disclosure depends on contextual factors, such as industry characteristics, regulatory environments, and investor sentiment [23]. These conflicting findings highlight the need for a more nuanced analysis that considers how different external conditions shape the financial outcomes of carbon information disclosure.

In the Chinese context, where regulatory policies and market dynamics are evolving, understanding the financial relevance of carbon information disclosure is particularly critical. Investors have placed a stronger emphasis on sustainability and responsible business practices, linking comprehensive environmental disclosure to increased investor confidence and higher market valuations [35]. The Chinese government has also encouraged companies to disclose environmental information, aligning with global trends toward sustainable corporate practices. At the same time, China’s transition toward mandatory environmental reporting reflects a shift toward global sustainability practices, making carbon information disclosure an increasingly integral aspect of corporate governance.

The application of stakeholder theory suggests that proactive carbon information disclosure enhances stakeholder trust, improves corporate reputation, and ultimately contributes to firm value [36,37,38]. Firms that disclose carbon information can reduce information asymmetry, improve investor confidence, and demonstrate their commitment to environmental sustainability, thereby increasing firm value [22,39,40]. Recent studies suggest that carbon information disclosure is not merely a compliance measure but a strategic tool that firms use to signal financial stability, resilience, and long-term commitment to sustainable business practices.

While prior studies have debated the financial implications of carbon information disclosure, there is a lack of systematic analysis that accounts for how different regulatory and market conditions influence this relationship. Given the findings in the literature, further research is required to examine the specific effects of carbon information disclosure on firm value, particularly in the Chinese market. This study fills this gap by providing empirical evidence on the financial effects of carbon information disclosure within China’s distinct regulatory, economic, and institutional setting. Based on the above analysis, this study proposes the following hypothesis:

Hypothesis 1:

Carbon information disclosure positively and significantly affects firm value.

2.2. The Moderating Effect of Green Innovation on the Relationship Between Carbon Information Disclosure and Firm Value

Resource-based theory provides an analytical framework for understanding how green innovation moderates the relationship between carbon information disclosure and firm value. This theory emphasizes that firms with unique, valuable, and inimitable resources can achieve a sustained competitive advantage [41]. Green innovation, as a strategic capability, enables firms to develop environmentally sustainable technologies and management practices, reinforcing the financial benefits of carbon information disclosure and enhancing firm value [42]. By fostering energy-efficient production processes and promoting eco-friendly product innovations, green innovation allows firms to strengthen their sustainability credentials, increasing their appeal to investors and stakeholders.

Firms that integrate green innovation into their environmental strategies are better positioned to enhance the credibility and effectiveness of their carbon information disclosure. Proactively investing in green technologies not only ensures regulatory compliance but also signals long-term commitment to sustainability, thereby improving corporate reputation and strengthening stakeholder trust [43]. This enhanced reputation strengthens firm value by attracting environmentally conscious investors, improving customer loyalty, and fostering long-term market competitiveness [44].

By integrating green innovation, firms can differentiate themselves from competitors, highlighting their proactive approach to sustainability. This differentiation results in improved financial performance, greater investor confidence, and an overall positive effect on firm value [45]. Similarly, green innovation reduces the financial burden associated with environmental compliance, mitigating potential negative market reactions to carbon information disclosure [46]. By enhancing operational efficiency and resource utilization, green innovation strengthens a firm’s environmental image, ensuring a sustained competitive advantage and facilitating market expansion [47].

Firms investing in green innovation face significant R&D costs, technological uncertainties, and market resistance, which can create financial strain and volatility [48]. If stakeholders perceive these investments as excessively risky or financially burdensome, the potential benefits of carbon information disclosure may be offset, ultimately affecting firm value negatively [49]. Additionally, firms that lack the capability to fully integrate green innovation into their business models may struggle to realize its financial benefits, leading to suboptimal outcomes in terms of firm value.

From the perspective of resource-based theory, firms that strategically invest in green innovation develop unique capabilities that allow them to effectively manage their environmental footprint and enhance the credibility of their carbon information disclosure [50,51]. These capabilities, including advanced environmental management systems and proprietary green technologies, provide firms with a competitive edge that enhances their long-term financial performance and sustainability goals [52]. However, for green innovation to effectively moderate the relationship between carbon information disclosure and firm value, firms must carefully manage associated risks and ensure that these initiatives align with market expectations and regulatory frameworks.

The significance of green innovation is particularly pronounced in China, where rapid industrial transformation and stringent environmental regulations have heightened the urgency of sustainable business practices [53]. Recognizing the pivotal role of green innovation, the Chinese government has implemented various policies and incentives, including subsidies, tax incentives, and research grants, to encourage firms to invest in green technologies [54,55,56]. These governmental initiatives create a favorable environment for firms to adopt green innovation, reducing cost barriers and incentivizing sustainable development strategies [57].

Empirical studies on Chinese firms further suggest that green innovation enhances the impact of carbon information disclosure on firm value. Firms with strong green innovation practices experience a greater positive effect on firm value when they disclose comprehensive carbon information [58,59]. This indicates that green innovation acts as a value-amplifying factor, magnifying the financial benefits of carbon information disclosure through increased market confidence and investor attraction. Moreover, green innovation allows firms to develop distinctive capabilities that are difficult for competitors to replicate, thus securing a long-term competitive advantage [60]. Additionally, proactive disclosure of green innovation efforts fosters a positive feedback loop, reinforcing stakeholder confidence and enhancing firm value [61].

Despite these benefits, concerns remain regarding the financial and strategic risks associated with green innovation. High investment costs and uncertain returns pose challenges for firms, particularly in industries with low profit margins or weak regulatory enforcement [62]. This concern highlights the importance of balancing innovation investments, regulatory compliance, and stakeholder expectations to ensure that green innovation contributes positively to firm value.

In summary, green innovation has the potential to enhance the positive impact of carbon information disclosure on firm value by improving corporate reputation, strengthening stakeholder trust, and ensuring long-term sustainability. However, the moderating effect of green innovation may vary depending on internal and external factors, including financial constraints, technological feasibility, and regulatory incentives. Given the mixed findings in the literature, further research is necessary to examine how green innovation influences the relationship between carbon information disclosure and firm value in the Chinese market. Based on the above analysis, this study proposes the following hypothesis:

Hypothesis 2:

Green innovation positively moderates the relationship between carbon information disclosure and firm value.

2.3. The Moderating Moderated Effect of Environmental Regulation to Green Innovation on the Relationship Between Carbon Information Disclosure and Firm Value

Understanding how environmental regulation influences the role of green innovation in the relationship between carbon information disclosure and firm value is critical for comprehending the interplay between external regulatory pressures and internal innovation capabilities. Institutional theory provides a strong theoretical lens to analyze how environmental regulations impose both normative and coercive pressures, compelling firms to integrate green innovation into their sustainability strategies [63]. These regulatory forces not only drive firms to enhance their environmental performance but also increase transparency in carbon information disclosure, thereby reinforcing the financial benefits associated with such disclosures.

Stricter environmental regulations serve as catalysts for firms to prioritize green innovation, thus ensuring compliance with sustainability standards, improving carbon information disclosure quality, and gaining competitive advantages [64,65]. In the absence of stringent regulatory pressures, firms may deprioritize green innovation, potentially weakening the role of carbon information disclosure in driving firm value [66,67].

Institutional theory suggests that regulatory environments create strong incentives for firms to invest in sustainability-related initiatives, with environmental regulation serving as a key external force that shapes corporate strategies. When stringent environmental policies are in place, firms are compelled to allocate resources to green innovation, strengthening the financial benefits of carbon information disclosure [15]. Similarly, regulatory compliance not only mitigates legal risks but also improves corporate reputation and financial performance [68]. Given that green innovation is a strategic internal asset, its ability to enhance the financial benefits of carbon information disclosure is contingent on the level of regulatory enforcement and industry-specific requirements [69,70,71]. Therefore, the extent to which environmental regulation moderates the impact of green innovation on the relationship between carbon information disclosure and firm value depends on the regulatory landscape and the pressures it generates.

China has implemented a series of stringent environmental policies to address pollution and promote sustainable development. The government’s regulatory approach includes mandatory carbon information disclosure requirements, emission reduction targets, and financial incentives for green innovation [72]. These regulatory interventions pressure firms to integrate green innovation into their operational strategies to meet compliance standards, improve environmental performance, and maintain market legitimacy [63].

Chinese firms are increasingly aware of the need to align their business practices with regulatory requirements to enhance their corporate reputation, mitigate legal risks, and strengthen investor confidence [73]. Compliance with environmental regulations not only reduces regulatory penalties but also signals a firm’s commitment to sustainable development, thereby attracting investment and increasing firm value. Firms that proactively adopt green innovation in response to regulatory pressures tend to experience more favorable market reactions and stronger financial performance [74]. Companies that lead in green technology development can enhance their carbon information disclosure practices, improve competitiveness, and achieve superior financial outcomes [75].

Government support for green innovation plays a crucial role in reinforcing these positive outcomes. Government incentives, such as subsidies, tax benefits, and research grants, encourage firms to invest in green technologies and integrate sustainability into their business models [55]. The Chinese government actively fosters a regulatory environment that promotes the adoption and diffusion of green innovation by providing financial assistance and policy support [76]. These measures not only help firms improve their environmental footprint but also enhance the credibility of their carbon information disclosure, thereby strengthening stakeholder trust [56,77].

Given the intricate interaction between environmental regulation, green innovation, carbon information disclosure, and firm value, it is essential to examine how regulatory pressures shape firms’ strategic sustainability responses. Firms that proactively align their green innovation efforts with environmental regulations can effectively amplify the positive impact of carbon information disclosure on firm value. In contrast, firms operating in weak regulatory environments may struggle to derive financial benefits from carbon information disclosure due to weak enforcement mechanisms and lower stakeholder pressure. By incorporating China’s distinct regulatory framework and innovation-driven policies, this study contributes new insights into how government intervention amplifies the financial relevance of carbon information disclosure and green innovation. Based on the above analysis, this study proposes the following hypothesis:

Hypothesis 3:

Environmental regulation positively moderates the moderating effect of green innovation on the relationship between carbon information disclosure and firm value.

3. Conceptual Framework and Methodology

Drawing on stakeholder theory, resource-based theory, and institutional theory, this paper proposes the research model shown in Figure 1. After a literature review, this research argues that good attention to carbon information disclosure will promote firm value. Meanwhile, this study suggests that green innovation could positively moderate the main relationship. In addition, moderate environmental regulations will amplify the moderating effects of green innovation in the relationship between carbon information disclosure and firm value. Finally, from several perspectives on firm characteristics and corporate governance variables, this study considers multiple control variables [78,79,80,81,82].

Table 1. Measurement of variables.

Variables		Symbol	Descriptions
Dependent Variable	Firm value	FV	Tobin’s q, Market Value of Firm/ Total assets-Net intangible assets-Net goodwill
Independent Variable	Carbon information disclosure	CID	Python 3.10 is used to count keyword frequencies, and the normalization by maximum–minimum method is used to obtain the value
Moderator Variable	Green innovation	GI	The number of green inventions with independent applications and green utility models with independent applications in the current year plus 1, taken as the natural logarithm of the total number
	Environmental regulation	ER	The ratio of investment in wastewater treatment and air pollution control in location and industrial added value
Control Variable	Size	Size	Natural logarithm of the total assets
	Solvency	Lev	Asset-liability ratio, Total Liabilities/Total Assets
	Liquidity	Liquid	Current Ratio, Current Assets/Current Liabilities
	Development ability	Growth	Growth Rate of Net Profit, (Current Period Net Profit–Last Period Net Profit)/Last Period Net Profit
	Profitability	Loss	The net profit of the year was less than 0, plus 1; otherwise, plus 0
	Size of Board	Board	The natural logarithm of board size
	Governance Capability	Indep	The ratio of independent directors to the total number of directors
	External Monitoring Ability	IShare	Institutional Ownership Ratio, Total Institutional Shares/Total Shares Outstanding
	Financial Transparency	Big4	If audited by one of the Big Four (PwC, Deloitte, KPMG, EY), plus 1; otherwise, plus 0
	Reliability	Opinion	If an Unqualified audit opinion is issued for its financial report in that year, plus 1; otherwise, plus 0

and

Table A2. Justification for choosing control variables.

Control Variable	Symbol	Descriptions	Justification
Size	Size	Natural logarithm of the total assets	Total assets provide a stable measure of firm scale, accounting for a company’s resource base and long-term investment capacity. Unlike revenue, which fluctuates due to market conditions, or the number of employees, which varies by industry structure, total assets offer a consistent and cross-comparable metric across different sectors.
Solvency	Lev	Asset-liability ratio, Total Liabilities/Total Assets	Leverage is a widely accepted indicator of a firm’s financial stability and risk exposure. Higher leverage increases financial risk, potentially impacting market valuation. Alternative solvency indicators, such as the debt-to-equity ratio, were considered but may be less stable due to capital structure variations across industries.
Liquidity	Liquid	Current Ratio, Current Assets/Current Liabilities	Liquidity reflects a firm’s short-term financial health and ability to meet immediate obligations. It serves as an important risk measure, as insufficient liquidity may lead to financial distress, negatively affecting firm value. Other liquidity measures, such as the quick ratio, were considered but may not fully capture firms’ working capital management strategies.
Development ability	Growth	Growth Rate of Net Profit, (Current Period Net Profit-Last Period Net Profit)/Last Period Net Profit	Growth potential reflects a firm’s ability to expand operations and generate future earnings, directly influencing firm valuation. Revenue growth is a preferred measure as it is less influenced by accounting choices compared to other metrics like asset growth or investment intensity.
Profitability	Loss	The net profit of the year was less than 0, plus 1; otherwise, plus 0	This approach effectively captures financial distress and differentiates between profitable and unprofitable firms. Unlike continuous profitability measures such as ROA or ROE, this dummy variable directly reflects a firm’s financial sustainability and earnings stability, allowing for a clearer distinction between firms experiencing financial difficulties and those generating positive returns.
Size of Board	Board	The natural logarithm of board size	Larger boards may improve strategic decision-making but could also lead to inefficiencies. Board size is included as it influences corporate governance effectiveness and firm performance.
Governance Capability	Indep	The ratio of independent directors to the total number of directors	Independent directors enhance corporate oversight, reducing information asymmetry and mitigating agency problems, which are critical for firm valuation.
External Monitoring Ability	IShare	Institutional Ownership Ratio, Total Institutional Shares/Total Shares Outstanding	Institutional investors play a key role in corporate governance by monitoring managerial actions and influencing strategic decisions, making this an important control variable.
Financial Transparency	Big4	If audited by one of the Big Four (PwC, Deloitte, KPMG, EY), plus 1; otherwise, plus 0	Audit quality affects financial reporting reliability, which impacts investor confidence and firm valuation.
Reliability	Opinion	If an Unqualified audit opinion is issued for its financial report in that year, plus 1; otherwise, plus 0	The auditor’s opinion on financial statements ensures the credibility of financial reporting and mitigates financial misrepresentation risks.

introduce the variable descriptions and measures, and further details are provided in the following sections.

3.1. Data and Sample

This study selected panel data from multiple authoritative sources, including the CSMAR Database, the Intellectual Property Office of the People’s Republic of China (CNIPA), the National Bureau of Statistics of China (NBS), and other publicly available databases. The panel data collection process involved identifying relevant sources, extracting data, and validating it for accuracy. This study used STATA 17.0 to examine the relationship between carbon information disclosure and firm value, as well as the moderating effects of green innovation and environmental regulation. The sample consisted of A-share listed companies on the Shanghai and Shenzhen Stock Exchanges from 2013 to 2022. To ensure data reliability, the selection process excluded financial firms due to their distinct regulatory environment, *companies with ST or ST status to eliminate firms experiencing financial distress, and firms with missing financial data to maintain dataset completeness [78]. After applying these criteria, the final dataset included 1753 firms over a ten-year period (2013–2022), providing a comprehensive view of China’s corporate landscape. The focus on A-share listed companies ensures that the findings are broadly applicable, contributing to the literature on corporate sustainability and financial performance.

Figure 2 examines the industry distribution of the 1753 sample firms, classified according to the CSRC 2012 industry classification [83] (

Table A1. China’s national economic industry classification.

Code	Industry	Code	Industry
A	Agriculture, Forestry, Animal Husbandry, and Fishery	C34	General Equipment Manufacturing
B	Mining	C35	Specialized Equipment Manufacturing
C	Manufacturing	C36	Automobile Manufacturing
C13	Processing of Agricultural and Sideline Food Products	C37	Railway, Shipbuilding, Aerospace, and Other Transportation Equipment Manufacturing
C14	Food Manufacturing	C38	Electrical Machinery and Equipment Manufacturing
C15	Alcoholic Beverages, Soft Drinks, and Refined Tea Manufacturing	C39	Computer, Communication, and Other Electronic Equipment Manufacturing
C17	Textile Industry	C40	Instrumentation Manufacturing
C18	Textile, Apparel, and Accessories Industry	C41	Other Manufacturing Industries
C19	Leather, Fur, Feather, and Related Products and Footwear Manufacturing	C42	Comprehensive Utilization of Waste Resources
C20	Wood Processing and Manufacturing of Wood, Bamboo, Rattan, Palm, and Straw Products	D	Electricity, Heat, Gas, and Water Production and Supply
C21	Furniture Manufacturing	E	Construction
C22	Paper and Paper Products Industry	F	Wholesale and Retail Trade
C23	Printing and Reproduction of Recorded Media	G	Transportation, Warehousing, and Postal Services
C24	Manufacturing of Cultural, Educational, Arts and Crafts, Sports, and Entertainment Products	H	Accommodation and Catering Services
C25	Petroleum, Coal, and Other Fuel Processing Industry	I	Information Transmission, Software, and Information Technology Services
C26	Chemical Raw Materials and Chemical Products Manufacturing	K	Real Estate Industry
C27	Pharmaceutical Manufacturing	L	Leasing and Business Services
C28	Chemical Fiber Manufacturing	M	Scientific Research and Technical Services
C29	Rubber and Plastic Products Industry	N	Water Conservancy, Environment, and Public Facilities Management
C30	Non-metallic Mineral Products Industry	P	Education
C31	Ferrous Metal Smelting and Rolling Processing Industry	Q	Health and Social Work
C32	Non-ferrous Metal Smelting and Rolling Processing Industry	R	Culture, Sports, and Entertainment
C33	Metal Products Industry	S	Public Administration, Social Security, and Social Organizations

), to provide context for the study of carbon information disclosure, green innovation, and firm value. The results indicate that the Manufacturing sector constitutes the majority of the sample (C: 66.11%), which is consistent with China’s industrial structure as a manufacturing-driven economy. Other important industries include Wholesale and Retail Trade (F: 6.22%), Information Transmission, Software, and Information Technology Services (I: 5.76%), and the Real Estate Industry (K: 4.51%), while infrastructure-related industries, such as Electricity, Heat, Gas, and Water Production and Supply (D: 3.65%) and Transportation, Warehousing, and Postal Services (G: 3.54%), are also represented.

Within the Manufacturing industry, the most represented sub-sectors include Computer, Communication, and Other Electronic Equipment Manufacturing (C39: 13.63%), Pharmaceutical Manufacturing (C27: 10.96%), Electrical Machinery and Equipment Manufacturing (C38: 9.84%), and Chemical Raw Materials and Chemical Products Manufacturing (C26: 9.75%), which are subject to regulatory oversight, environmental constraints, and strong market incentives for green innovation, reflecting China’s industrial landscape and the availability of long-term firm-level data. In contrast, smaller sub-sectors, such as Comprehensive Utilization of Waste Resources Manufacturing (C42: 1.47%) and the Paper and Paper Products Industry (C22: 1.55%), have lower representation. Recognizing the industry distribution of the sample provides important context for evaluating the generalizability of the findings and understanding how regulatory policies and green innovation influence the relationship between carbon information disclosure and firm value.

3.2. Variables

Independent Variable: Given that Chinese enterprises have a low response rate to CDP questionnaires and limited participation in CDP scoring, relying solely on CDP-based evaluation methods is impractical. Instead, corporate annual reports serve as a primary channel for carbon information disclosure, making text mining and keyword frequency analysis a more objective, comparable, and replicable approach. In this paper, carbon information disclosure was measured by a text mining approach based on keyword frequency analysis derived from the TCFD framework. Python 3.10 was used to extract and quantify keyword occurrences from corporate reports, with word frequency normalized using the min–max method to generate a carbon information disclosure score. A higher score indicates a greater level of corporate attention to carbon information disclosure. To further validate this method, this paper used the E-score from the CNRDS ESG database as an alternative measure and found a strong correlation between the CID measure and the E-score, supporting the reliability of the text-based approach. This method ensures objectivity, comparability, and repeatability, reducing potential biases associated with manual content analysis [84,85].

Dependent Variable: Firm value was measured by using Tobin’s Q, which captures the market’s forward-looking assessment of a firm’s growth potential and profitability, particularly in the context of carbon information disclosure [32,86,87]. This paper adopted the ratio of Market Value of Firm to Total assets–Net intangible assets–Net goodwill to measure Tobin’s Q. Following the CSMAR database, this approach better reflects market expectations and firm valuation in China. By excluding intangible assets and goodwill, this measure mitigates distortions from accounting policies and government interventions, providing a more reliable estimate of firm value relative to its physical capital investment.

Moderator Variables: Green innovation was measured using the number of independently applied green invention patents and green utility model patents filed by a company within the same year [88]. China’s innovation policies strongly emphasize the development of green technologies and patenting and utility activity, whether explicitly labeled as green or not, which often aligns with sustainability objectives due to regulatory mandates and financial incentives. As a result, patent-based indicators serve as a reasonable proxy for green innovation within China’s institutional framework. Data were sourced from the Intellectual Property Office of the People’s Republic of China (CNIPA) and obtained via the CSMAR database. To ensure validity, plus 1 was added to the total count before taking the natural logarithm. A higher value indicates greater green innovation capability, providing a reliable measure aligned with sustainability and environmental performance.

Moderator Variables: Environmental regulation was measured by using the ratio of investment in wastewater treatment and air pollution control to industrial added value, based on data published by the National Bureau of Statistics (NBS) [89,90,91]. This ratio, ranging from 0 to 1, reflects the financial commitment of firms and local governments to environmental protection, with higher values indicating greater regulatory pressure. This metric provides a comprehensive assessment of the impact of environmental regulation on corporate behavior and firm value.

Control Variables: As mentioned earlier, the main factor used in this study considered multiple control variables, as listed in Table 1 and Table A2 [78,79,80,81,82], from several perspectives on Firm Size (Size), Solvency (Lev), Liquidity (Liquid), Development ability (Growth), Profitability (Loss), Size of Board (Board), Governance Capability (Indep), External Monitoring Ability (IShare), Financial Transparency (Big4), and Reliability (Opinion), which were taken as the control variables. The selection of control variables in this study was critical for accounting for firm-specific financial and governance factors that may influence firm value, thereby ensuring that the empirical analysis accurately captured the effects of carbon information disclosure, green innovation, and environmental regulation. By incorporating both financial- and governance-related controls, this study mitigates potential omitted variable bias, enhances comparability across firms, and strengthens the reliability of the findings.

4. Results

4.1. Descriptive Statistics

This section presents the descriptive statistics of the variables used in this study. To mitigate the influence of extreme values, winsorization was applied at the 1% and 99% levels to key variables, including carbon information disclosure (CID), firm value (FV), green innovation (GI), and environmental regulation (ER). Additionally, winsorization was extended to Liquidity (Liquid), Development ability (growth), and External Monitoring Ability (IShare) to control for potential outliers that could bias the regression results. Variables such as Firm Size (Size), Solvency (Lev), Size of Board (Board), and Governance Capability (Indep) were not winsorized because of their naturally bounded distributions or meaningful economic interpretations. The dummy variables (Loss, Big4, and Opinion) also remained unchanged. This approach ensures the robustness of empirical results while preserving meaningful variations in firm characteristics.

In

Table 2. Descriptive statistics.

	N	Mean	SD	25%	50%	75%	Min	Max
FV	17,530	1.986	1.226	1.187	1.584	2.311	0.828	7.491
CID	17,530	0.023	0.035	0	0.011	0.027	0	0.202
GI	17,530	0.921	1.204	0	0	1.609	0	4.812
ER	17,530	0.002	0.002	0.001	0.001	0.002	0	0.008
Size	17,530	22.588	1.306	21.665	22.416	23.357	19.585	26.452
Lev	17,530	0.436	0.196	0.282	0.431	0.583	0.046	0.908
Liquid	17,530	2.176	1.927	1.135	1.588	2.45	0.366	12.422
Growth	17,530	0.14	0.336	−0.033	0.09	0.236	−0.508	1.818
Loss	17,530	0.106	0.308	0	0	0	0	1
Board	17,530	2.131	0.197	1.946	2.197	2.197	1.609	2.708
Indep	17,530	37.694	5.524	33.33	36.36	42.86	28.57	60
IShare	17,530	45.803	23.912	28.212	47.786	64.565	0.534	90.973
Big4	17,530	0.072	0.258	0	0	0	0	1
Opinion	17,530	0.978	0.146	1	1	1	0	1

, the dependent variable, firm value (FV), has a mean of 1.986 and a median of 1.584, indicating that most firms operate at a market value exceeding their replacement cost, reflecting strong investment expansion incentives.

The independent variable, carbon information disclosure (CID), has a mean of 0.023 and a median of 0.011, suggesting generally low corporate attention to carbon information disclosure. Notably, 25% of firms scored 0, indicating that a significant portion of firms do not engage in carbon-related reporting. The relatively high standard deviation reflects variation in disclosure efforts, with some firms demonstrating strong commitment while others show minimal interest. Firms with higher disclosure scores may gain competitive advantages in sustainability-driven markets, while those with lower scores risk falling behind as environmental concerns gain prominence.

The green innovation (GI) moderating variable has a mean of 0.921 but a median of 0, indicating that while some firms actively engage in green innovation, many exhibit minimal or no commitment. The high standard deviation suggests disparities in corporate efforts, with firms investing in sustainability-driven innovation likely benefiting from stronger market positioning. The environmental regulation (ER) moderating variable has a mean of 0.002, indicating relatively weak regulatory enforcement.

Overall, the findings highlight limited corporate focus on carbon information disclosure, likely influenced by weak regulatory pressure and varying levels of engagement in environmental initiatives. The variation in disclosure scores suggests that while some firms recognize the strategic value of carbon-related reporting, many still exhibit low levels of attention to these practices.

4.2. Correlation Analysis and Multicollinearity Test

The results of the correlation analysis indicate that the relationships among the key variables follow expected economic and theoretical patterns, with no severe multicollinearity concerns (

Table A3. Correlation analysis.

Variables	FV	CID	GI	ER	Size	Lev	Liquid	Growth	Loss	Board	Indep	IShare	Big4	Opinion
FV	1
CID	−0.180 ***	1
GI	−0.129 ***	0.267 ***	1
ER	0.047 ***	−0.190 ***	−0.120 ***	1
Size	−0.442 ***	0.310 ***	0.415 ***	−0.080 ***	1
Lev	−0.345 ***	0.132 ***	0.211 ***	−0.006	0.520 ***	1
Liquid	0.280 ***	−0.147 ***	−0.169 ***	0.003	−0.360 ***	−0.656 ***	1
Growth	0.065 ***	0.001	0.036 ***	0.026 ***	0.038 ***	0.024 ***	−0.029 ***	1
Loss	−0.018 **	0.023 ***	−0.035 ***	−0.086 ***	−0.078 ***	0.137 ***	−0.083 ***	−0.199 ***	1
Board	−0.135 ***	0.064 ***	0.074 ***	0.075 ***	0.259 ***	0.126 ***	−0.125 ***	−0.008	−0.063 ***	1
Indep	0.044 ***	−0.002	0.034 ***	−0.048 ***	0.023 ***	0.005	0.011	−0.000	0.027 ***	−0.543 ***	1
IShare	−0.062 ***	0.098 ***	0.120 ***	0.064 ***	0.468 ***	0.226 ***	−0.172 ***	0.038 ***	−0.124 ***	0.243 ***	−0.043 ***	1
Big4	−0.118 ***	0.073 ***	0.171 ***	−0.024 ***	0.381 ***	0.142 ***	−0.103 ***	−0.011	−0.037 ***	0.094 ***	0.053 ***	0.259 ***	1
Opinion	−0.017 **	0.006	0.051 ***	0.033 ***	0.043 ***	−0.068 ***	0.028 ***	0.066 ***	−0.185 ***	0.016 **	0.007	0.058 ***	0.022 ***	1

*** p < 0.01, ** p < 0.05, * p < 0.1.

). The Pearson correlation test was applied as it is suitable for measuring the linear relationships between continuous variables, making it an appropriate method for this study [92]. The Spearman rank correlation test was not used, as it is designed for ordinal or nonlinear relationships, which is not the focus of this research. In order to assess multicollinearity, a Variance Inflation Factor (VIF) test was conducted (

Table A4. Multicollinearity test.

Variables	VIF	1/VIF
Size	2.322	0.431
Lev	2.202	0.454
Liquid	1.775	0.563
Board	1.626	0.615
Indep	1.484	0.674
IShare	1.355	0.738
GI	1.26	0.794
Big4	1.196	0.836
CID	1.181	0.847
Loss	1.144	0.874
ER	1.072	0.933
Growth	1.048	0.954
Opinion	1.046	0.956
Mean VIF	1.439

), confirming that all VIF values remain below 10, with a maximum of 2.322 (Size) and a minimum of 1.046 (Opinion). These results ensure the robustness and reliability of the regression model.

Overall, the findings provide empirical support for this study’s theoretical framework. Future research could further explore the mechanisms underlying these relationships by incorporating industry-specific characteristics and regional disparities to comprehensively analyze the interactions among carbon information disclosure, green innovation, and environmental regulation, as well as their combined and interacted impacts on firm value.

4.3. F Test, LM Test, and Hausman Test

This study employed a fixed effects model to analyze the relationship between carbon information disclosure, green innovation, environmental regulation, and firm value while controlling for both firm-specific and year-specific effects. The fixed effects approach was chosen to mitigate potential endogeneity issues arising from year-invariant, unobservable firm characteristics and macroeconomic fluctuations, ensuring more reliable estimation results. This paper conducted an F test, an LM test, and a Hausman test to compare the suitability of ordinary least squares (OLS), random effects (REs), and fixed effects (FEs) models.

Table A5. F test, LM test and Hausman test.

Test Type	Statistic	p-Value	Conclusion
F Test	163.07	0.0000	FE model better than OLS model
LM Test	13,114.64	0.0000	RE model better than OLS model
Hausman Test	282.27	0.0000	FE model better than RE model

presents the results of these model selection tests. The F test reports a test statistic of 163.07 (p = 0.0000), indicating that the fixed effects model significantly outperforms the OLS model, capturing both firm-level and year-specific heterogeneity. Similarly, the LM test produces a test statistic of 13,114.64 (p = 0.0000), confirming that the random effects model is superior to the OLS model by accounting for firm-specific variations. Lastly, the Hausman test yields a test statistic of 282.27 (p = 0.0000), supporting the fixed effects model over the random effects model due to the correlation between unobservable firm-specific effects and explanatory variables.

Combining these results, the fixed effects model emerges as the most appropriate choice, as it effectively controls for both firm-level and year-specific heterogeneity, thereby enhancing the robustness and reliability of the estimation. This selection ensures greater explanatory power in analyzing the relationship between the key variables in this study.

4.4. Base Regression Analysis

Table 3. Base regression analysis.

	(1)	(2)	(3)	(4)	(5)	(6)
	FV	FV	FV	FV	FV	FV
CID	−6.2472 ***	1.4286 ***	2.0000 ***	1.9041 ***	1.7556 ***	1.7546 ***
	(0.3334)	(0.2790)	(0.2880)	(0.2859)	(0.2819)	(0.2827)
Size			−0.4543 ***	−0.4828 ***	−0.5744 ***	−0.5748 ***
			(0.0384)	(0.0389)	(0.0376)	(0.0375)
Lev			0.0739	0.1851	0.3148 **	0.3172 **
			(0.1300)	(0.1319)	(0.1310)	(0.1314)
Liquid			−0.0130	−0.0095	−0.0144	−0.0143
			(0.0099)	(0.0099)	(0,0099)	(0.0099)
Growth				0.1103 ***	0.0598 ***	0.0595 ***
				(0.0221)	(0.0219)	(0.0219)
Loss				−0.1218 ***	−0.1067 ***	−0.1056 ***
				(0.0212)	(0.0211)	(0.0212)
Board					0.0395	0.0394
					(0.0916)	(0.0917)
Indep					0.0062 **	0.0062 **
					(0.0025)	(0.0025)
IShare					0.0155 ***	0.0155 ***
					(0.0012)	(0.0012)
Big4						0.0092
						(0.0811)
Opinion						0.0208
						(0.0517)
Constant	2.1300 ***	1.9535 ***	12.1974 ***	12.7862 ***	13.7896***	13.7788 ***
	(0.0257)	(0.0064)	(0.8416)	(0.8517)	(0.8454)	(0.8420)
Year FE	NO	YES	YES	YES	YES	YES
Id FE	NO	YES	YES	YES	YES	YES
N	17,530	17,530	17,530	17,530	17,530	17,530
Adj. R2	0.0324	0.6461	0.6621	0.6639	0.6760	0.6760

Standard errors in parentheses. * p < 0.1, ** p < 0.05, *** p < 0.01.

presents the baseline regression results examining the impact of carbon information disclosure (CID) on firm value (FV), progressively incorporating fixed effects and control variables to enhance robustness. The analysis, based on 1753 firm ten-year observations, ensures statistical reliability. Columns (1) to (6) sequentially introduce fixed effects, firm characteristics, financial performance indicators, corporate governance factors, and Financial Transparency variables to control for potential confounders. Across all models, CID remains consistently significant, confirming its positive influence on firm value and supporting Hypothesis 1.

Column (1) reports the univariate regression results without controlling for firm-specific or time-fixed effects. CID (β = −6.2472, t = −18.74) is significant at the 1% level, indicating an initial negative relationship between carbon information disclosure and firm value. However, this result likely suffers from omitted variable bias, as firms with high carbon information disclosure may also face higher compliance costs, operational adjustments, or investor concerns about environmental risks, potentially reducing their market valuation. Column (2) introduces firm and year fixed effects to control for unobserved heterogeneity, significantly altering the results. CID (β = 1.4286, t = 5.12) becomes positive and remains significant at the 1% level, with the adjusted R² increasing sharply to 0.6461. This substantial change indicates that previously omitted factors, such as industry regulations, market conditions, and firm-specific characteristics, had biased the univariate results. Once these fixed effects are accounted for, carbon information disclosure emerges as a value-enhancing strategy, likely due to its role in reducing information asymmetry, strengthening stakeholder trust, and improving firm reputation. This transformation underscores the importance of controlling for external influences when assessing the financial implications of carbon information disclosure.

Columns (3) to (5) progressively add firm characteristics and corporate governance variables, ensuring that the observed effect of CID is not driven by other firm-specific factors. As control variables are incorporated, the coefficient of CID increases to 2.0000 in Column (3) when Size, Lev, and Liquid are added; then, it slightly decreases to 1.9041 in Column (4) after introducing Growth and Loss and further stabilizes around 1.7556 in Column (5) with Board, Indep, and IShare. The initial increase in CID’s coefficient suggests that firm characteristics reinforce the positive effect of carbon information disclosure on firm value. The subsequent stabilization of the coefficient indicates that governance mechanisms absorb part of the explanatory power of CID but do not fundamentally alter its positive effect, reinforcing the robustness of the results.

Column (6) presents the full model. CID (β = 1.7546, t = 6.21) remains significant at the 1% level, confirming its positive impact on firm value even after accounting for all firm-level characteristics and external monitoring mechanisms. The adjusted R² of 0.6760 indicates that the model explains a substantial proportion of the variation in firm value, providing strong empirical support for the positive financial implications of carbon information disclosure. These findings confirm that while control variables may absorb part of the explanatory power of CID, its core effect on firm value remains stable and significant, reinforcing its role as a value-enhancing strategy.

These findings provide empirical support for Hypothesis 1, aligning with stakeholder theory, which demonstrates that a higher degree of attention to carbon information disclosure positively influences firm value. Economically, an increase of one unit in CID corresponds to an average increase of 1.7546 in FV, a substantial proportion of the sample mean.

Given China’s evolving environmental policies, improving carbon information disclosure practices is essential for firms to strengthen governance and market positioning. These findings not only contribute to academic understanding but also provide insights for policymakers and businesses on the role of carbon information disclosure in enhancing firm value and corporate sustainability. Future research should further explore how green innovation and environmental regulation moderate this relationship to optimize corporate resource allocation and drive sustainable transformation.

4.5. The Moderating Effect of Green Innovation on the Relationship Between Carbon Information Disclosure and Firm Value

Table 4. The moderating effect of green innovation on the relationship between carbon information disclosure and firm value.

	(1)	(2)	(3)	(4)
	FV	FV	FV	FV
CID	1.4286 ***	1.7546 ***	1.6670 ***	1.3210 ***
	(0.2790)	(0.2827)	(0.2815)	(0.3041)
Size		−0.5748 ***	−0.5902 ***	−0.5911 ***
		(0.0375)	(0.0376)	(0,0375)
Lev		0.3172 **	0.3187 **	0.3206 **
		(0.1314)	(0.1309)	(0.1310)
Liquid		−0.0143	−0.0144	−0.0145
		(0.0099)	(0.0099)	(0.0099)
Growth		0.0595 ***	0.0611 ***	0.0609 ***
		(0.0219)	(0.0219)	(0.0219)
Loss		−0.1056 ***	−0.1056 ***	−0.1057 ***
		(0.0212)	(0.0211)	(0.0211)
Board		0.0394	0.0373	0.0422
		(0.0917)	(0.0919)	(0.0920)
Indep		0.0062 **	0.0060 **	0.0061 **
		(0.0025)	(0.0025)	(0.0025)
IShare		0.0155 ***	0.0154 ***	0.0155 ***
		(0.0012)	(0.0012)	(0.0012)
Big4		0.0092	0.0047	0.0028
		(0.0811)	(0.0802)	(0.0797)
Opinion		0.0208	0.0157	0.0155
		(0.0517)	(0.0514)	(0.0514)
GI			0.0472 ***	0.0443 ***
			(0.0109)	(0.0111)
c_CIDGI				0.3498 **
				(0.1437)
Constant	1.9535 ***	13.7788 ***	14.1011 ***	14.1151 ***
	(0.0064)	(0.8420)	(0.8436)	(0.8422)
Year FE	YES	YES	YES	YES
Id FE	YES	YES	YES	YES
N	17,530	17,530	17,530	17,530
Adj. R2	0.6461	0.6760	0.6766	0.6767

Standard errors in parentheses. * p < 0.1, ** p < 0.05, *** p < 0.01.

presents the regression results examining the moderating role of green innovation (GI) in the relationship between carbon information disclosure (CID) and firm value (FV). Columns (1) to (3) examine the impact of CID on FV, sequentially introducing control variables and green innovation (GI) to address potential confounding factors. Column (4) further incorporates c_CIDGI to explore the moderating effect of GI. Across all models, CID remains statistically significant, reinforcing its robust influence on firm value.

In Column (1), where only firm and year fixed effects are controlled for, the CID coefficient is 1.4286, exhibiting a strong positive association with FV. When firm characteristics and corporate governance variables are introduced in Column (2), the CID coefficient increases to 1.7546, suggesting that these factors strengthen rather than confound the relationship between carbon information disclosure and firm value. However, in Column (3), after incorporating GI, the CID coefficient slightly decreases to 1.6670. This decline suggests that part of CID’s explanatory power is absorbed by green innovation, indicating that firms engaging in green innovation may already integrate carbon information disclosure practices as part of their strategic initiatives.

In Column (4), CID (β = 1.3210, t = 4.34) is significant at the 1% level, and c_CIDGI (β = 0.3498, t = 2.43) is significant at the 5% level, indicating that green innovation plays a significant positive moderating role in the relationship between carbon information disclosure and firm value and supporting Hypothesis 2. Meanwhile, this pattern suggests that firms with higher green innovation can leverage carbon information disclosure more effectively to enhance market valuation.

Green innovation enhances the positive effect of carbon information disclosure on firm value. By introducing c_CIDGI, this study not only confirms the moderating role of green innovation in the relationship between carbon information disclosure and firm value but also highlights the critical role of green innovation in improving firms’ long-term competitiveness and market value. Particularly in the context of China, with increasing government support for green innovation and the growing market emphasis on environmental protection, firms that leverage carbon information disclosure to showcase their green innovation capabilities can not only improve transparency and trust but also attract greater market support and investor attention.

These findings align with resource-based theory, which posits that green innovation serves as a strategic resource, enhancing environmental management, market competitiveness, and long-term growth. Firms that actively engage in green innovation not only comply with environmental regulations but also signal their commitment to sustainability, earning greater investor confidence and market recognition. In China’s policy-driven environment, where green transformation is a national priority, leveraging green innovation to enhance carbon information disclosure can further strengthen market positioning and drive firm value.

Overall, the results underscore that green innovation amplifies the benefits of carbon information disclosure, reinforcing its role as a key driver of firm value in sustainability-focused markets. Future research should further explore the interplay between environmental regulation, green innovation, and corporate sustainability strategies.

To better illustrate the moderating effect of green innovation on the relationship between carbon information disclosure and firm value, this study performed panel data analysis using Stata 17.0 software and produced Figure 3. Specifically, two linear regression models were constructed to represent scenarios of low and high levels of GI. The functional expressions of these two models are y = 1.222x + 14.103 and y = 2.064x + 14.209, where x represents the level of CID and y represents FV. By setting corresponding commands in Stata, Figure 3 illustrates the impact of CID on FV under different GI levels, highlighting the varying trends across these scenarios.

Table 4 and Figure 3 provide strong empirical evidence supporting the moderating role of green innovation (GI) in the relationship between carbon information disclosure (CID) and firm value (FV). Figure 3 illustrates that firms with higher levels of green innovation (red line) experience a steeper slope in the CID–FV relationship compared to those with lower levels (blue line). This indicates that the positive impact of carbon information disclosure on firm value is significantly amplified in firms that actively engage in green innovation, while the effect remains weaker for firms with limited green innovation capabilities. These findings provide robust support for Hypothesis 2, demonstrating that green innovation strengthens the value-enhancing effect of carbon information disclosure.

In the Chinese market, where industrial transformation and environmental sustainability have become national priorities, the role of green innovation is particularly prominent. The Chinese government has introduced a series of policy incentives, including green credit, tax incentives, subsidies for green technology, and carbon trading mechanisms, to encourage firms to enhance their environmental performance. With the carbon peaking and carbon neutrality goals, enterprises face increasing regulatory pressure and market expectations, making green innovation an essential strategy for maintaining both compliance and competitiveness. Firms that invest in green technologies, low-carbon manufacturing, and clean energy solutions not only reduce environmental risks and enhance compliance efficiency but also gain stronger market recognition, attract long-term investors, and improve financial performance.

The findings align with resource-based theory, which suggests that green innovation provides firms with unique competitive advantages, particularly in environments where environmental standards are continuously evolving. Firms with strong green innovation capabilities are better equipped to translate carbon information disclosure into firm value, as their sustainability efforts signal operational efficiency, long-term resilience, and strategic alignment with national environmental goals. In contrast, firms with weaker green innovation capabilities may struggle to realize the full benefits of carbon information disclosure, as their environmental efforts are perceived as reactive rather than strategic.

These results highlight the crucial role of green innovation in shaping the effectiveness of carbon information disclosure, reinforcing the need for continued policy support to incentivize corporate sustainability initiatives. Given the uneven development of green innovation across different industries and regions in China, policymakers should tailor environmental policies to encourage enterprises to integrate green innovation into their long-term strategies. For firms, enhancing green innovation investment and aligning carbon information disclosure with sustainability goals will be key to improving market competitiveness, investor confidence, and firm value in the long run.

4.6. The Moderating Moderated Effect of Environmental Regulation to Green Innovation on the Relationship Between Carbon Information Disclosure and Firm Value

The regression analysis results in

Table 5. The moderating moderated effect of environmental regulation to green innovation on the relationship between carbon information disclosure and firm value.

	(1)	(2)	(3)	(4)
	FV	FV	FV	FV
CID	1.4286 ***	1.7546 ***	1.6618 ***	1.1938 ***
	(0.2790)	(0.2827)	(0.2814)	(0.3249)
Size		−0.5748 ***	−0.5898 ***	−0.5949 ***
		(0.0375)	(0.0376)	(0.0376)
Lev		0.3172 **	0.3207 **	0.3220 **
		(0.1314)	(0.1312)	(0.1312)
Liquid		−0.0143	−0.0144	−0.0142
		(0.0099)	(0.0099)	(0.0099)
Growth		0.0595 ***	0.0608 ***	0.0627 ***
		(0.0219)	(0.0219)	(0.0218)
Loss		−0.1056 ***	−0.1056 ***	−0.1048 ***
		(0.0212)	(0.0211)	(0.0211)
Board		0.0394	0.0376	0.0462
		(0.0917)	(0.0919)	(0.0921)
Indep		0.0062 **	0.0060 **	0.0060 **
		(0.0025)	(0.0025)	(0.0025)
IShare		0.0155 ***	0.0154 ***	0.0154 ***
		(0.0012)	(0.0012)	(0.0012)
Big4		0.0092	0.0044	0.0045
		(0.0811)	(0.0802)	(0.0792)
Opinion		0.0208	0.0157	0.0110
		(0.0517)	(0.0514)	(0.0512)
GI			0.0472 ***	0.0415 ***
			(0.0109)	(0.0111)
ER			−3.8808	−12.8187 *
			(7.4369)	(7.4811)
c_GIER				−16.8886 ***
				(5.3548)
c_CIDGI				0.4512 ***
				(0.1741)
c_CIDER				−1.6 × 102
				(182.0698)
c_CIDGIER				290.6983 ***
				(112.6143)
Constant	1.9535 ***	13.7788 ***	14.0984 ***	14.2237 ***
	(0.0064)	(0.8420)	(0.8435)	(0.8454)
Year FE	YES	YES	YES	YES
Id FE	YES	YES	YES	YES
N	17,530	17,530	17,530	17,530
Adj. R2	0.6461	0.6760	0.6765	0.6771

Standard errors in parentheses. * p < 0.1, ** p < 0.05, *** p < 0.01.

explore the moderating moderated effects of environmental regulation (ER) to green innovation (GI) on the relationship between carbon information disclosure (CID) and firm value (FV). This study aims to verify whether moderate environmental regulation pressure enables green innovation to further amplify the positive impact of carbon information disclosure on firm value. This study supports Hypothesis 3 by progressively introducing four models to analyze the interaction between environmental regulation and green innovation and their influence on the relationship between carbon information disclosure and firm value.

In the context of China, environmental regulation plays a crucial role in shaping corporate sustainability practices, yet its implementation varies across different regions due to disparities in regulatory enforcement between central and local governments. While the central government has established ambitious carbon reduction targets and policies aimed at promoting green transformation, local governments often prioritize short-term economic growth, leading to inconsistencies in regulatory enforcement. This variation results in differing levels of regulatory pressure on firms, which in turn affects the extent to which environmental regulations encourage or hinder the role of green innovation in amplifying the benefits of carbon information disclosure. Furthermore, as China transitions toward a more market-oriented and environmentally sustainable economy, firms must navigate an evolving institutional landscape where regulatory stringency and stakeholder expectations continue to rise. In this context, balancing environmental compliance with innovation-driven competitiveness becomes a critical challenge for firms seeking to enhance their firm value.

The interplay between resource-based theory and institutional theory underscores the moderating moderated role of environmental regulation in the relationship between carbon information disclosure and firm value. On the one hand, firms with strong internal resources can proactively integrate environmental regulation into their innovation strategies, using green technologies to reinforce market legitimacy and stakeholder trust. On the other hand, excessive regulatory pressure may impose financial and operational burdens, limiting firms’ ability to obtain value-enhancing outcomes. Therefore, while environmental regulation can moderate the impact of green innovation, the extent of this influence depends on firms’ resource endowments and their ability to navigate institutional pressures effectively. These findings highlight the importance of a well-calibrated regulatory environment that fosters green innovation while mitigating excessive compliance burdens, ultimately strengthening the positive role of carbon information disclosure in enhancing firm value.

Columns (1) to (3) examine the impact of carbon information disclosure (CID) on firm value (FV), sequentially introducing control variables, green innovation (GI), and environmental regulation (ER) to address potential confounding factors. Column (4) further incorporates c_CIDGI, c_CIDER, c_GIER, and c_CIDGIER to explore the combined moderating effects of green innovation and environmental regulation. Across all models, CID remains statistically significant, indicating its robust influence on firm value. The progressive inclusion of control variables and interaction terms allows for a more precise estimation of the effects while highlighting the moderated moderating roles of environmental regulation to green innovation in the main relationship.

The CID coefficient fluctuates as additional variables and interaction terms are introduced, reflecting how green innovation and environmental regulation reshape the impact of carbon information disclosure on firm value. In Column (1), where only firm and year fixed effects are included, the CID coefficient is 1.4286, indicating a strong positive impact on FV. After introducing firm characteristics and financial controls in Column (2), the CID coefficient increases to 1.7546, suggesting that these factors strengthen rather than dilute the CID-FV relationship. In Column (3), after incorporating GI and ER, the CID coefficient slightly decreases to 1.6618, indicating that green innovation and environmental regulation absorb part of CID’s standalone explanatory power. This might be because green innovation and carbon information disclosure have overlapping effects, as many firms already integrate green innovation into their disclosure practices. When GI is introduced as a separate variable, the standalone impact of CID decreases, as part of its previously captured effect is now attributed to firms’ green innovation strategies. Similarly, environmental regulation may incentivize firms to disclose carbon-related information as part of compliance efforts, making policy enforcement itself an important determinant of firm value. This implies that in the absence of ER, CID’s coefficient may reflect both voluntary and policy-driven disclosure effects. Once ER is controlled for, the remaining effect of CID reflects its voluntary disclosure component, leading to a lower but still significant coefficient.

In Column (4), CID (β = 1.1938, t = 3.67) is significant at the 1% level. The further reduction in the CID coefficient in the full model, after introducing interaction terms, highlights that green innovation and environmental regulation jointly shape the effectiveness of carbon information disclosure. Rather than diminishing its importance, this indicates that carbon information disclosure’s value-enhancing effects are more pronounced when combined with innovation efforts and regulatory frameworks. c_CIDGI and c_CIDGIER were incorporated into the final model to test how environmental regulation moderated green innovation in the relationship between carbon information disclosure and firm value. The results show that c_CIDGI (β = 0.4512, t = 2.59) is significant at the 5% level, indicating that green innovation significantly enhances the positive impact of carbon information disclosure on firm value. Specifically, green innovation, as a critical tool for firms to cope with environmental regulation pressure, not only improves the depth and accuracy of carbon information disclosure but also strengthens stakeholder recognition of the firms’ environmental management capabilities and social responsibility.

Further analysis of the three-way interaction term c_CIDGIER (β = 290.6983, t = 2.58) shows significance at the 1% level, indicating that under environmental regulation pressure, green innovation further amplifies the effect of carbon information disclosure on firm value. This result validates Hypothesis 3, highlighting the pivotal role of environmental regulation in driving firms’ green innovation and improving the quality of carbon information disclosure. When environmental regulation pressure is at a moderate level, firms are more effective in transforming regulatory requirements into innovation-driven initiatives. Through green innovation, firms optimize resource allocation and improve operational efficiency, thereby enhancing carbon information disclosure to firm value.

To validate this conclusion and further understand the leverage effects brought by the moderating moderated effects, this study grouped firms based on the quartiles of environmental regulation intensity. The analysis examined the strength of the moderating role of green innovation on the relationship between carbon information disclosure and firm value under different levels of environmental regulation intensity. This study grouped enterprises into four categories: a Low ER group, a Lower-middle ER group, a Middle ER group, and a High ER group. The regression analysis results in

Table 6. The moderating moderated effect of green innovation in different environmental regulation levels.

Group	Low ER Group (Below 25th Percentile)		Lower-Middle ER Group (25th–50th Percentile)		Middle ER Group (50th–75th Percentile)		High ER Group (Above 75th Percentile)
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
	FV	FV	FV	FV	FV	FV	FV	FV
CID	0.3283	0.6198	2.2338 ***	1.6210 *	2.6165 ***	1.8572 **	1.3322*	0.7166
	(0.3385)	(0.4231)	(0.7609)	(0.8617)	(0.6881)	(0.7977)	(0.8032)	(0.8081)
GI	0.0283 *	0.0333 *	0.0656 ***	0.0677 ***	0.0372 *	0.0370 *	0.0134	0.0136
	(0.0167)	(0.0176)	(0.0199)	(0.0200)	(0.0211)	(0.0210)	(0.0247)	(0.0249)
Size	−0.7952 ***	−0.7957 ***	−0.8219 ***	−0.8221 ***	−0.7974 ***	−0.7980 ***	−0.7658 ***	−0.7680 ***
	(0.0886)	(0.0886)	(0.0847)	(0.0847)	(0.0731)	(0.0727)	(0.0666)	(0.0666)
Lev	0.3563	0.3554	0.3238	0.3276	0.8510 ***	0.8481 ***	0.8110 ***	0.8247 ***
	(0.2930)	(0.2927)	(0.3481)	(0.3480)	(0.2613)	(0.2593)	(0.2522)	(0.2528)
Liquid	−0.0631 **	−0.0630 **	0.0120	0.0121	0.0132	0.0126	−0.0061	−0.0060
	(0.0288)	(0.0288)	(0.0201)	(0.0200)	(0.0244)	(0.0244)	(0.0198)	(0.0197)
Growth	0.1257 ***	0.1251 ***	0.0033	0.0030	0.0624	0.0619	0.0859 **	0.0870 **
	(0.0423)	(0.0424)	(0.0517)	(0.0517)	(0.0466)	(0.0467)	(0.0388)	(0.0389)
Loss	−0.0688 **	−0.0698 **	−0.0524	−0.0534	−0.1456 ***	−0.1457 ***	−0.1827 ***	−0.1820 ***
	(0.0310)	(0.0310)	(0.0542)	(0.0541)	(0.0458)	(0.0458)	(0.0420)	(0.0419)
Board	−0.1943	−0.2006	−0.3989 *	−0.3948 *	0.2190	0.2130	0.4318 **	0.4424 **
	(0.2041)	(0.2049)	(0.2301)	(0.2301)	(0.1822)	(0.1814)	(0.2126)	(0.2134)
Indep	0.0016	0.0014	−0.0005	−0.0003	0.0051	0.0052	0.0106 *	0.0108 **
	(0.0048)	(0.0049)	(0.0067)	(0.0067)	(0.0050)	(0.0049)	(0.0055)	(0.0055)
IShare	0.0153 ***	0.0152 ***	0.0205 ***	0.0206 ***	0.0168 ***	0.0168 ***	0.0112 ***	0.0112 ***
	(0.0035)	(0.0034)	(0.0027)	(0.0027)	(0.0022)	(0.0022)	(0.0022)	(0.0022)
Big4	−0.0651	−0.0675	−0.1792	−0.1833	−0.1772	−0.1885	−0.2143 *	−0.2013 *
	(0.1536)	(0.1539)	(0.1570)	(0.1570)	(0.1233)	(0.1222)	(0.1107)	(0.1094)
Opinion	0.0302	0.0302	0.0678	0.0653	−0.0184	−0.0254	−0.1985	−0.1970
	(0.0666)	(0.0666)	(0.1204)	(0.1203)	(0.1036)	(0.1041)	(0.1427)	(0.1422)
c_CIDGI		−0.2512 *		0.7411 **		0.9181 **		1.1455 ***
		(0.1446)		(0.3525)		(0.3955)		(0.4139)
Constant	19.5898 ***	19.6140 ***	20.1826 ***	20.1738 ***	18.0751 ***	18.1115 ***	17.2414 ***	17.2509 ***
	(2.0658)	(2.0655)	(2.0345)	(2.0349)	(1.6182)	(1.6104)	(1.4876)	(1.4909)
Year FE	YES	YES	YES	YES	YES	YES	YES	YES
Id FE	YES	YES	YES	YES	YES	YES	YES	YES
N	4178	4178	4040	4040	4126	4126	4135	4135
Adj. R2	0.7889	0.7889	0.7160	0.7161	0.7079	0.7083	0.7175	0.7180

The Fisher test p-value for c_CIDGI between the Lower-middle ER group and the Middle ER group is 0.385. Standard errors in parentheses. * p < 0.1, ** p < 0.05, *** p < 0.01.

explore the moderating moderated effects of environmental regulation (ER) to green innovation (GI) on the relationship between carbon information disclosure (CID) and firm value (FV).

In the Low ER group, the regression results in Column (1) show that CID (β = 0.3283, t = 0.97) is not significant. This indicates that under low environmental regulation, carbon information disclosure fails to enhance firm value. Enterprises exhibit lax compliance and lack motivation for disclosure, as they perceive minimal regulatory penalties for non-disclosure. Consequently, the quality and quantity of carbon information disclosure remain insufficient, rendering it ineffective in positively impacting firm value. In Column (2), CID (β = 0.6198, t = 1.47) is not significant, indicating that market recognition of carbon disclosure is still limited under weak regulatory enforcement. c_CIDGI (β = −0.2512, t = −1.74) is significant at the 10% level. This demonstrates that low-intensity environmental regulation fails to effectively incentivize green innovation, which in turn does not significantly enhance the positive impact of carbon information disclosure on firm value. In other words, while carbon information disclosure itself is valid in low-regulation environments, green innovation does not fulfil its expected role.

In the High ER group, Column (7) indicates that CID (β = 1.3322, t = 1.66) is significant at the 10% level. This suggests that despite the high regulatory pressure, stringent environmental regulation enhances firm value by improving transparency and credibility. In Column (8), c_CIDGI (β = 1.1455, t = 2.77) is significant at the 1% level, whereas CID is not significant (β = 0.7166, t = 0.89). This implies that under high-intensity environmental regulation, the moderating effect of green innovation on the positive relationship between carbon information disclosure and firm value is absent. As regulations become stricter, the CID coefficient decreases, possibly because firms face greater disclosure requirements, but the market has not yet fully internalized and priced these disclosures, reducing their incremental value. While c_CIDGI (β = 1.1455, t = 2.77) is significant at the 1% level and positive, suggesting a degree of synergy between green innovation and carbon information disclosure, the high compliance pressure may lead enterprises to focus excessively on meeting regulatory requirements, neglecting the potential of green innovation. As a result, green innovation fails to fully enhance the effectiveness of carbon information disclosure.

In the Lower-middle ER group, the regression results in Column (3) reveal that CID (β = 2.2338, t = 2.94) is significant at the 1% level, and GI (β = 0.0656, t = 3.29) is significant at the 1% level. This indicates that under lower-middle regulatory pressure, green innovation significantly promotes firm value. In Column (4), CID (β = 1,6210, t = 1.88) is significant at the 10% level, indicating regulatory enforcement has reached a level where most firms are required to disclose, reducing the differentiation effect of carbon information disclosure and its marginal contribution to firm value. c_CIDGI (β = 0.7411, t = 2.10) is significant at the 5% level. This demonstrates that under lower-middle regulatory pressure, green innovation significantly amplifies the positive impact of carbon information disclosure on firm value. In other words, moderate environmental regulation provides sufficient incentives for enterprises to adopt green innovation measures, enabling carbon information disclosure to not only enhance corporate credibility but also build investor trust, thereby increasing firm value.

The regression results in Column (4) also show that GI (β = 0.0677, t = 3.39) is significant at the 1% level, confirming that green innovation itself has a significant positive impact on firm value under lower-middle regulatory pressure. Moderate environmental regulation provides enterprises with adequate room for innovation, allowing them to improve resource allocation efficiency, reduce environmental risks, and enhance brand value through green innovation, ultimately strengthening their market competitiveness.

For enterprises in the Lower-middle ER group, given the significant impact of green innovation on firm value, greater emphasis should be placed on implementing green innovation, promoting sustainable development, and applying green technologies. In this environment, competitive advantages will rely more on green innovation than on external policy incentives. Therefore, enterprises should increase investment in research and development, optimize green innovation strategies, and improve the quality of carbon information disclosure to enhance market recognition of their sustainability strategies.

In the Middle ER group, Column (5) shows that CID (β = 2.6165, t = 3.80) is significant at the 1% level. GI (β = 0.0372, t = 1.77) is significant at the 10% level, suggesting that green innovation continues to positively influence firm value under moderate regulatory pressure. In Column (6), CID (β = 1.8572, t = 2.33) is significant at the 5% level. The CID coefficient further decreases, possibly because stringent regulations have made carbon disclosure a common practice, diminishing its role as a market differentiator, with investors shifting their focus to firms’ actual carbon reduction efforts and green innovation capabilities. c_CIDGI (β = 0.9181, t = 2.32) is significant at the 5% level. This indicates that under moderate regulatory pressure, the synergy between green innovation and carbon information disclosure becomes more prominent. Green innovation not only directly enhances firm value but also amplifies the transparency and market effects of carbon information disclosure, significantly improving market recognition and investor trust.

It is worth noting that although the regression results in Column (4) and Column (6) exhibit different paths of influence, the Fisher test for coefficient differences reveals that their differences are not statistically significant, with a p-value of 0.385. This suggests that the synergy between green innovation and carbon information disclosure under lower-middle and moderate regulatory pressures is fundamentally similar. The use of the Fisher test is essential in this context because a direct comparison of coefficient magnitudes across different groups is not always reliable, as variations in sample size, variance, and distribution may affect raw coefficient estimates. By employing the Fisher test, this paper verified whether the differences in coefficients across regulatory groups are meaningful or merely the result of sample variation. These findings provide the basis for further research. The result of the Fisher test suggests that moderate environmental regulatory pressure can amplify the positive effect of green innovation in enhancing the impact of carbon information disclosure on firm value.

To provide a clearer verification of Hypothesis 3 and show the moderating effects of green innovation on the relationship between carbon information disclosure and firm value under different levels of environmental regulation, this study used Stata software to generate Figure 3. These visualizations demonstrate how green innovation impacts the relationship between carbon information disclosure and firm value under varying regulatory conditions, offering valuable insights into how environmental policies shape corporate behavior and enhance firm value.

Figure 4 illustrates, in detail, the moderating effect of green innovation on the relationship between carbon information disclosure and firm value in the Lower-middle and Middle ER groups. Figure 4 includes two linear regression lines showing the impact of carbon information disclosure on firm value under different levels of green innovation. The blue line represents a low GI level, which follows the equation y = 1.245x + 17.462, while the red line represents a high GI level, which is described by the equation y = 3.007x + 17.577. The x-axis represents CID, ranging from low (Low IV) to high (High IV), and the y-axis represents FV. This indicates that under moderate environmental regulation pressures, which range from the Lower-middle to Middle ER groups, high levels of green innovation can more effectively enhance firm value through carbon information disclosure. This result further underscores the critical role of green innovation in improving the quality of carbon information disclosure, and it amplifies carbon information disclosure’s impact on firm value under moderate levels of environmental regulation.

The analysis results in Table 5 and Table 6 and Figure 4 collectively indicate that under moderate environmental regulation pressures, which encompass the Lower-middle and Middle ER groups, green innovation significantly enhances the positive impact of carbon information disclosure on firm value and exhibits similar trends and patterns. Specifically, Figure 4 combines the effects of the Lower-middle and Middle ER groups with the blue line’s slope for low green innovation at 1.245 and the red line’s slope for high green innovation at 3.007. These results validate Hypothesis 3, indicating that environmental regulation enhances the market effectiveness of carbon information disclosure by promoting green innovation, optimizing resource allocation, and improving operational efficiency.

In the Lower-middle and Middle ER groups, firms are not only able to innovate within the framework of regulatory requirements but also to enhance their market recognition and firm value through green innovation. Conversely, under the Low and High ER groups, the moderating effect of environmental regulation is not significant: low environmental regulation fails to provide sufficient innovation incentives, while high environmental regulation may impose excessive compliance pressures, limiting firms’ ability to leverage green innovation to improve the effectiveness of carbon information disclosure. Therefore, the design of environmental regulations must strike a proper balance between incentive and constraint to achieve the synergistic effects of green innovation and carbon information disclosure in promoting firm value.

In conclusion, the analysis results in Table 5 and Table 6 and Figure 4 support Hypothesis 3, indicating that environmental regulation enhances the positive impact of carbon information disclosure on firm value by promoting green innovation. This finding provides a theoretical basis for optimizing environmental policy design and emphasizes the need to consider firms’ heterogeneous demands and resource endowments when implementing policies to ensure that they effectively promote the combination of green innovation and carbon information disclosure, thereby achieving sustainable development goals.

In addition, both the endogeneity test and robustness test confirm the reliability of the results, demonstrating that they are not driven by omitted variable bias, reverse causality, or model specification issues, thereby reinforcing the validity of the study’s conclusions.

5. Discussion

The findings of this paper provide important insights into the relationship between carbon information disclosure (CID) and firm value (FV), along with the moderating effects of green innovation (GI) and environmental regulation (ER). The results confirm that CID positively affects FV, supporting stakeholder theory, which posits that enhanced corporate accountability improves investor confidence and corporate reputation [24,25]. These findings align with prior studies emphasizing the role of sustainability reporting in enhancing firm performance and market valuation [26,30]. Furthermore, GI strengthens this positive effect, indicating that firms investing in sustainable technologies and innovation derive additional benefits from carbon information disclosure. This result supports resource-based theory, which suggests that firms with strong technological capabilities can better leverage sustainability disclosures for competitive advantage [41,42]. However, this paper also highlights that the regulatory environment plays a crucial role in shaping these effects. ER amplifies the moderating effect of GI, suggesting that well-structured regulatory policies can stimulate corporate sustainability efforts while mitigating potential financial burdens [15,64].

Compared with previous studies, which primarily examine CID and FV in isolation, this paper advances the literature by integrating GI and ER as key moderating factors, revealing their interactive influence. This provides a more nuanced understanding of how sustainability policies and green innovation strategies interact to drive firm performance. Moreover, while prior research largely focuses on developed economies, this paper contributes to understanding CID dynamics in China, where state-driven regulatory frameworks and green finance policies play a central role in shaping corporate sustainability initiatives [35].

Despite the generally positive effects of CID, GI, and ER on FV, the results suggest that excessive regulatory pressure may lead to financial constraints, deterring firms from engaging in proactive green innovation. This aligns with prior findings that stringent environmental policies can create cost burdens for firms, particularly those with limited financial resources [66]. Thus, policymakers should aim for a balanced regulatory approach that encourages green innovation without imposing excessive compliance costs. Additionally, firms should actively disclose their specific measures and achievements in green innovation and carbon reduction, ensuring transparency in their carbon information disclosure. The government should flexibly adjust the intensity of environmental regulation based on the characteristics of different regions and industries to avoid excessive compliance pressure that suppresses firms’ innovation momentum.

This paper also highlights several limitations that should be addressed in future research. First, while the analysis controls for firm characteristics and governance factors, it does not fully account for industry-specific effects, which may influence the effectiveness of CID and GI. Future research could explore how industry characteristics shape these relationships. Second, the long-term effects of evolving environmental regulations remain an open question. As regulatory policies continue to shift, longitudinal studies could provide deeper insights into how firms adapt over time. Third, this paper relies on publicly disclosed carbon information, which may be subject to reporting biases. Future studies could incorporate alternative measures, such as third-party environmental ratings, to enhance robustness. Finally, while this paper focuses on China, extending the analysis to other emerging economies could offer comparative insights into the role of CID, GI, and ER in different institutional settings.

6. Conclusions

This paper provides empirical evidence that carbon information disclosure enhances firm value, and this effect is strengthened by green innovation, with environmental regulation further amplifying this relationship. Different from previous studies that focus on direct linear relationships, this study introduces a moderated moderation framework, providing a more comprehensive theoretical perspective on how internal corporate capabilities (green innovation) and external regulatory forces (environmental regulation) jointly influence sustainability-driven value creation. This framework deepens our understanding of the conditional factors shaping the effectiveness of carbon information disclosure, addressing gaps in the existing literature. These findings highlight the importance of balancing environmental policies, corporate sustainability practices, and investor expectations in driving long-term economic and environmental benefits.

Given China’s specific national conditions, the government urgently needs to implement effective measures to advance firms’ green transformation. First, the government should promote innovation in green technology through policy incentives and financial support. This includes providing more funding for green innovation, tax incentives, and green financial tools to encourage firms to increase their investments in green technology research and development. Second, the government should establish and improve carbon information disclosure standards, encouraging firms to enhance the transparency of carbon information disclosure, especially under moderate environmental regulation conditions. Firms should actively disclose their specific measures and achievements in green innovation and carbon reduction. Additionally, the government should promote the further development of green finance by using instruments such as green bonds and green funds to provide financial support for firms’ green transformation and alleviate their financial burdens in green innovation.

China’s “1 + N” environmental framework and policy played an active role in advancing corporate carbon information disclosure and green innovation. However, the effectiveness of policy implementation varies across regions and industries. Firms should continue to increase investments in green innovation, particularly in renewable energy, green technology, and energy conservation and emission reduction. For example, firms could invest in green projects such as solar energy, wind energy, and electric vehicles, which would not only reduce carbon emissions but also improve production efficiency and save energy costs.

The government should optimize green financial support to provide firms with more funding, especially to meet the financial needs of technology research and development and green projects. The government could use measures such as green credit and green project loans to provide financial support for firms’ green innovation. Additionally, the government should continue to promote the implementation of green policies, flexibly adjusting regulation intensity and offering differentiated policy support. For instance, under moderate environmental regulation, the government should encourage firms to increase investments in green technology research and application through funding subsidies and reward mechanisms, ensuring that firms achieve green innovation and sustainable development within the framework of environmental regulations.

In addition, the Chinese government should continue to increase support for clean energy and green technology. Strengthening the quality of carbon information disclosure and enhancing the transparency of carbon information disclosure through green innovation can effectively improve firms’ market transparency and investor trust. Firms can regularly publish carbon footprint reports and environmental impact assessments to demonstrate their achievements in green innovation. Transparent and detailed environmental reporting not only enhances a firm’s green brand image but also increases investor trust, further promoting recognition in the capital market.

Firms can not only enhance their value through green innovation but also strengthen their market competitiveness and investor trust by improving carbon information disclosure. Firms should build on green innovation to further enhance the transparency of carbon information disclosure, particularly by integrating the outcomes of green innovation with carbon information disclosure to demonstrate their environmental achievements and social responsibility to investors. Moreover, firms should focus more on aligning green innovation with market demands, particularly in the application of green technologies. Simultaneously, firms should enhance the market orientation of carbon information disclosure, particularly by showcasing their environmental actions and the environmental benefits of green products to consumers, thereby boosting market demand for green products.

For investors, this paper reaffirms that carbon information disclosure is an important indicator of corporate sustainability and financial performance. Firms that engage in transparent carbon information disclosure and proactive green innovation strategies are more likely to attract investor confidence and achieve higher market valuations. The positive moderating role of green innovation suggests that investors should prioritize firms with strong green innovation capabilities, as these firms are better positioned to capitalize on regulatory shifts and sustainability trends.

The growing emphasis on Environmental, Social, and Governance investing in China has led to increased scrutiny of corporate sustainability disclosures. This paper employs keyword frequency analysis to measure carbon information disclosure, providing an objective, replicable, and scalable alternative to traditional CDP scores or manual content analysis. This paper highlights that firms with higher levels of green innovation experience stronger financial benefits from carbon information disclosure, indicating that investors should consider green innovation as a key determinant when assessing the long-term value of a company. Additionally, firms operating under moderate regulatory pressure tend to perform better, suggesting that investors should evaluate the regulatory environments in which firms operate. As China’s green finance sector expands, investors should prioritize firms that actively implement environmental policies in their business strategies. Financial institutions can develop green bonds and ESG investment products to channel capital toward firms that demonstrate strong carbon information disclosure and green innovation capabilities. The results also suggest that investors should push for enhanced corporate environmental reporting standards, ensuring that firms disclose not only their carbon footprint but also their sustainability-driven innovations.

For corporate managers, this paper underscores the strategic importance of carbon information disclosure and green innovation in enhancing firm value. The findings confirm that firms with higher levels of carbon information disclosure experience increased investor confidence, reduced risk perception, and stronger market valuation, particularly when complemented by green innovation efforts. This reinforces the need for a proactive approach to sustainability rather than a reactive compliance-based strategy. Green innovation is not merely a cost burden but a value-enhancing factor that helps firms achieve greater operational efficiency, reduce compliance risks, and gain competitive advantages. Firms should actively invest in clean energy, sustainable production processes, and low-carbon technologies to enhance their market positioning. In order to maximize the benefits of green innovation, firms should actively register their technological advancements as patents or inventions, as well as explore ways to protect and commercialize their green innovations. Patents or inventions not only provide legal protection but also serve as valuable intangible assets that enhance a firm’s competitiveness, attract investment, and signal commitment to sustainable development. By prioritizing patent or inventions registration, firms can fully capitalize on their green innovation efforts while reinforcing their leadership in sustainability. Given that moderate environmental regulation further strengthens the impact of green innovation, firms should engage constructively with policymakers and regulators, advocating for policies that encourage green innovation.

Additionally, corporate managers should align their carbon information disclosure strategies with their green innovation efforts, ensuring that sustainability initiatives are effectively communicated to investors and stakeholders. Firms should enhance the quality and credibility of their carbon reporting, leveraging third-party verification and standardized reporting frameworks to build transparency. By integrating carbon information disclosure with corporate social responsibility initiatives, firms can further differentiate themselves in the market and strengthen their brand reputation. As China’s environmental policies continue to evolve, corporate managers must remain adaptable and forward-thinking. Developing long-term green innovation roadmaps, securing financial resources for sustainability projects, and actively engaging in industry collaborations will be critical for navigating regulatory challenges and capitalizing on the transition to a low-carbon economy.

In conclusion, China’s carbon peaking and carbon neutrality goals are increasing pressure on firms to improve environmental transparency. Green credit policies, tax incentives, and emissions trading markets have provided financial and regulatory incentives for firms to adopt sustainable business models. China’s carbon peaking and carbon neutrality goals impose increasing pressure on firms to enhance environmental transparency. Policies such as green credit, tax incentives, and emissions trading markets have provided financial and regulatory incentives for firms to integrate sustainability into their business strategies. However, this study also highlights that excessive regulatory pressure may constrain financial resources, potentially discouraging proactive green innovation. A well-calibrated policy framework that combines regulatory enforcement with incentive-based mechanisms is essential to mitigate these challenges. By offering targeted subsidies for green R&D, supporting carbon information disclosure initiatives, and expanding access to green finance, policymakers can facilitate corporate compliance while ensuring sustained competitiveness. An innovation-driven regulatory environment can reposition environmental compliance as a strategic advantage, enabling firms to enhance operational efficiency, attract investment, and achieve long-term value creation.

Future research should further examine industry and region-specific heterogeneities in the relationship between carbon information disclosure, green innovation, environment regulation, and firm value. While this study employs panel data fixed-effects models and a comprehensive set of control variables to mitigate omitted variable bias, potential concerns related to reverse causality and unobserved confounding factors remain. Future research could leverage causal inference methods, such as instrumental variables (IVs), difference-in-differences (DID), or propensity score matching (PSM), to strengthen the robustness of the findings and further validate the directionality of the relationships explored in this study. Additionally, assessing the long-term impacts of evolving environmental regulations on corporate sustainability strategies will provide valuable insights for policymakers and business leaders. By continuously refining regulatory frameworks, fostering green innovation, and strengthening corporate sustainability commitments, stakeholders can collectively advance China’s transition toward a more sustainable, innovation-driven, and globally competitive economy.