*5.3. Carbon Disclosure*

In recent years, listed companies have been obliged to disclose carbon information related to their production and operation processes and their products to satisfy the concerns of relevant stakeholders, such as shareholders, consumers, and regulatory authorities [68,69]. According to the legitimacy and voluntary disclosure theories, the relationship between carbon disclosure and companies' market value presents two conflicting results. Specifically, we should empirically identify how carbon disclosure affects companies' market value for Chinese CET policies. The empirical model of mechanism model is as follows:

$$disclosure\_{it} = \beta\_0 + \beta\_1 treated\_i \times time\_l + \beta\_2 \times X\_{it} + \mu\_i + \gamma\_t + \varepsilon\_{it} \tag{7}$$

$$Ln(MV)\_{it} = \beta\_0 + \beta\_1 treated\_i \times time\_l + \beta\_2 \times X\_{it} + disclosure\_{it} + \mu\_i + \gamma\_t + \varepsilon\_{it} \tag{8}$$

where disclosure represents the degree of companies' carbon disclosure. We used the evaluation data of listed companies' social responsibility reports by Hexun index to represent the degree of companies' carbon disclosure.

The regression results are shown in Table 8. The results indicate that carbon disclosure plays a negative role in the mechanism by which the CET policy affects companies' market value. According to the legitimacy theory, there is an invisible contract between companies and society, which makes listed companies increase carbon disclosure to meet investors' expectations, thereby maintaining legitimacy. However, the cost of environmental information collection and disclosure is likely to be greater than the benefits obtained by enterprises, especially when enterprises increase costs and improve carbon performance to meet relevant stakeholders' needs. Obviously, a large increase in enterprise costs will reduce companies' market value. These results are consistent with those of previous studies, such as those of Aragon-Correa et al. (2016) and Liu and Zhang (2017), who stated that carbon disclosure enhances cost legitimation and reduces companies' market value [44,45].

Columns (3) and (4) of Table 8 show the regression results after dividing the sample into high-carbon and low-carbon industries. The results indicate that carbon disclosure has a significantly negative correlation with companies' market value for low-carbon industries, while the reduction effect in the market value of high-carbon industries is insignificant.


**Table 8.** Regression results of mediation mechanism analysis based on carbon disclosure.

Note: Standard errors are in parentheses, and they are clustered at firm level. \*, \*\*, \*\*\* indicate statistical significance at the 10%, 5%, and 1% levels, respectively. Columns (1) and (2) show the results of the mediation mechanism analysis based on carbon disclosure. Column (3) shows the regression results for the high-carbon industries. Column (4) shows the regression results for the low-carbon industries.
