Disclosing Green, Acting Gray: The Impact of Sudden Attention on Firms’ Strategic Environmental Efforts

We examine the motivations and outcomes of firms’ strategic actions in response to external professional attention. Using stock index reconstitutions in China as sudden and exogenous shocks, we find that firms receiving more attention from analysts and institutional investors are more likely to disclose environmental policies. China provides a particularly useful setting because environmental disclosures by listed firms are highly standardized, allowing us to compare disclosure responses across firms. These disclosures are associated with short-term stock price gains, higher environmental ratings, and more positive media coverage. However, they do not result in improved environmental performance. Our findings reveal that the primary motivation is short-term enhancement of the corporate environmental image, with limited effects on driving meaningful environmental improvements.