Carbon Emission Disclosure Quality and Corporate Default Risk: Evidence from China

Amid the global rise of environmental regulations, carbon trading schemes, and environmental, social and governance strategies, carbon disclosure has become a critical component for firms seeking to build green, low-carbon business models and maintain competitiveness in an era of global decarbonization. While extant literature has largely examined the financial implications of aggregate carbon disclosure indices, fine-grained analyses focusing specifically on carbon emission disclosure quality—a substantively meaningful dimension—remain scarce. Addressing this gap, this study investigates the impact of carbon emission disclosure quality on corporate default risk, using a comprehensive sample of A-share listed firms in China over the period 2013–2022. Our empirical results reveal that higher carbon emission disclosure quality is significantly associated with lower default risk, a finding that remains robust across a battery of robustness tests. Mechanism analyses further indicate that this mitigating effect is more pronounced among firms with lower financialization levels and lower operational risk. This finding suggests that carbon disclosure should be embedded within a firm’s substantive low-carbon transition strategy. Heterogeneity tests show that the risk-reducing role of carbon emission disclosure quality is stronger in firms exhibiting higher levels of green innovation and greater expenditures on green governance. These findings contribute theoretically by expanding the understanding of the financial consequences stemming from carbon emission disclosure quality, thereby enriching the literature at the intersection of sustainability reporting and corporate risk management.