Understanding the Impact of Mandatory CSR Disclosure on Green Innovation: Evidence from Chinese Listed Firms

Abstract Drawing on the institutional view of legitimacy theory, we examine whether and under which conditions a policy tool, mandatory corporate social responsibility (CSR) reporting, enforced by constituents positively triggers firms to make substantive environmental responses. Using China's 2008 CSR reporting policy as a quasi‐natural experiment and the difference‐in‐differences estimation approach, the results reveal that after implementation of this policy, mandatory CSR reporting firms show substantially higher green innovation performance than non‐CSR reporting firms. We further find that this effect is stronger for firms located in areas with high environmental enforcement intensity, for state‐owned enterprises and for those with higher levels of media coverage. Moreover, we make a nuanced investigation on whether the media coverage is laden with a negative or positive tone, and find that both negative and positive coverage strengthen the relationship between mandatory CSR disclosure and green innovation.