The impact of declarative and interactive carbon disclosure on firm value: complements or substitutes?

The intrinsic link between carbon disclosure and firm value deserves in-depth study in light of the global proposal for "carbon neutrality" and the concurrent advancement of both declarative and interactive carbon disclosure practices. Extant research on separate value effects of declarative and interactive carbon disclosure is inconsistent with their simultaneous development. This paper reveals the heterogeneous value effects of declarative and interactive carbon disclosure in terms of information asymmetry and reputation and explores their intertwined value effects according to their characteristics and efficient market hypothesis, which is the first to consider both declarative and interactive carbon disclosure when examining the impact of carbon disclosure on firm value. In terms of methodology, a metric for assessing the quality of interactive carbon disclosure has been created. Using data from Chinese A-share listed firms from 2015 to 2021, we find that declarative carbon disclosure promotes firm value by alleviating information asymmetry and improving the firm reputation. Poor interactive carbon disclosure exacerbates information asymmetry, damages the firm reputation, and thus declines firm value, while high-quality one can alleviate information asymmetry and help firms gain word-of-mouth, thus enhancing firm value. Declarative and interactive carbon disclosure are substitutes for improving firm value. Heterogeneity analysis finds that high-quality interactive carbon disclosure containing positive carbon information and firms' business layouts can improve firm value. The results are beneficial to firms to synergize the use of multiple carbon disclosure methods to enhance firm value.