Corporate Environmental Disclosure, Strategic Green Technology Innovation, and Government Environmental Subsidies

Corporate environmental disclosure has become a significant approach to increasing corporate value. This study examines the relationship between government environmental subsidies and corporate environmental disclosure. The results indicate that corporate environmental disclosure is positively associated with government environmental subsidies. Further analysis reveals that corporate environmental disclosure is associated with higher levels of strategic green technology innovation rather than substantive green technology innovation, which may represent a potential channel associated with its relationship with government environmental subsidies. A subsample test of heavily polluting and non-heavily polluting enterprises reveals that environmental disclosure is positively associated with government environmental subsidies in both cases, indicating that the government provides positive feedback to green development plans reported in the MD&A of all types of enterprises. A comparative analysis suggests that the positive association between corporate environmental disclosure and government environmental subsidies was stronger before the implementation of the Environmental Protection Tax Law. This suggests that the greening of the legal system reflects the government’s greater attention to the green sector. This study uses China’s capital market data to measure corporate environmental disclosure in MD&A and the conclusions offer novel insights into improving laws and regulations on MD&A disclosures.