Environmental tax reform and corporate disclosure strategy

• Environmental tax reform increases visualization in corporate environmental disclosures. • Green innovation serves as a key mechanism linking environmental tax reform to visualization. • The effect is pronounced for SOEs and firms with lower financing constraint or stricter environmental regulations. This paper examines the relationship between environmental tax reform and visualization in environmental disclosures based on the institutional theory. Evidence from A-share listed firms in China shows that environmental tax reform drives firms to employ visualization in environmental disclosures. By stressing positive environmental outcomes, firms strategically project legitimacy to stakeholders. Finally, we find that the impact of the environmental tax reform is more pronounced among firms with lower financing constraints, those located in regions with stricter environmental regulations, and state-owned enterprises. Our findings demonstrate that visualization plays a crucial role in upholding corporate legitimacy.