*2.3. Carbon Disclosure*

Carbon disclosure is a tool that describes companies' carbon-related activities and information to stakeholders. There are generally two types of theories regarding the impact of carbon disclosure on the market value of companies: legitimacy theory and voluntary disclosure theory. According to the legitimacy theory, the cost of environmental information collection, management, and disclosure may outweigh the benefits. To meet various stakeholders' requirements, companies with inferior carbon performance would make soft and unverifiable qualitative disclosure about their performance to maintain legitimacy [44,45]. When the legitimacy of a company is threatened, stakeholders may perceive the company as unsustainable.

Furthermore, information about process inefficiency and environmental initiatives accessible to competitors may weaken firm competition and financial performance, while misleading information or errors in reports can also increase litigation costs significantly [46,47]. Conversely, the voluntary disclosure theory posits that carbon disclosure is positively associated with market value [48]. Under the CET scheme, mandatory carbon reporting [regarding corporate social responsibility (CSR)] helps companies communicate their carbon emissions information and increase information transparency [10]. The improved transparency of high-quality disclosure reduces the information gap to stakeholders, thereby resulting in financial consequences through lower risk [49]. Consequently, carbon disclosure can help stakeholders, such as shareholders and creditors, to make better investment decisions.

Finally, carbon disclosure can also help stakeholders, such as regulatory agencies, institutional investors, and the public, to better monitor and regulate a company's carbon emissions [42,50]. A company's high-quality carbon disclosure often leads to high carbon performance, thus affecting its market value. Therefore, we can hypothesize that the relationship between the CET policy and companies' market value by enhancing carbon disclosure seems to be mixed and inconsistent.
