Developing a Disclosure‐Based Index to Test the Value‐Relevance of Sustainable Governance Practices in the Context of China's Emerging Markets

ABSTRACT Sustainable corporate governance, which integrates environmental, social, and governance principles and sustainable development goals into corporate decision‐making processes, has increasingly been recognized as a vital component of long‐term business success. Although sustainable corporate governance (SCG) practices are widely believed to be positively associated with higher firm value, often accompanied by lower risk exposure, enhanced innovation capability, and stronger stakeholder relationships, existing empirical evidence remains mixed, particularly in emerging market contexts. This study examines the relationship between sustainable corporate governance and firm value using data from Chinese listed companies from 2014 to 2023. Results reveal a significant positive relationship between sustainable corporate governance and firm value. This study provides empirical evidence on the relationship between sustainable corporate governance and firm value within China's unique institutional context, thereby enriching the corporate governance literature. The findings also offer important implications for policymakers and practitioners, suggesting that companies pursuing economic performance while balancing environmental and social responsibilities are more likely to achieve superior long‐term outcomes.