How Do Firms Respond to Community Environmental Requirements? Corporate Commitment to Climate Change and the Role of Corporate Environmental Governance

ABSTRACT Research on corporate responses to climate change is becoming increasingly prevalent, as such responses are crucial for firms' survival and competitiveness. Although existing studies suggest stakeholder requirements as core drivers of corporate commitment to climate change, they fall short in explaining the mechanisms through which these requirements are translated into corporate responses. Drawing on signaling theory, this study addresses this gap by examining the signaling mechanisms between communities and firms, employing a multidimensional measurement and analyzing panel data using Poisson regression. The findings indicate that community engagement serves as a credible signal conveying community environmental requirements and facilitates corporate commitment to climate change, while heterogeneous firm responses are moderated by corporate environmental governance mechanisms. These results are consistent across multiple robustness tests. This study contributes to the existing literature on corporate commitment to climate change and signaling theory, offering academic and practical implications, and suggesting avenues for future research.