Environmental Disclosure and Firm Value in Emerging Markets: Insights from Sri Lankan Listed Companies

Abstract

The growing emphasis on environmental, social, and governance (ESG) criteria has increased pressure on firms to disclose environmental information. However, evidence on how corporate environmental disclosure (CED) affects firm value remains limited in emerging markets such as Sri Lanka, particularly in the post-COVID-19 period. This study examines whether voluntary CED enhances market valuation in a context where reporting practices are still evolving. Using a quantitative approach, panel data were collected from 100 companies listed on the Colombo Stock Exchange between 2020 and 2024. Environmental disclosure was measured through content analysis of annual reports based on the Global Reporting Initiative framework, while firm value was proxied by Tobin’s Q. Firm size, leverage, profitability, sales growth, and age were included as control variables. Fixed-effects panel regression results reveal a significant positive relationship between environmental disclosure and firm value. The findings support stakeholder and legitimacy theories, suggesting that transparent environmental reporting enhances investor confidence and market credibility. The study highlights the strategic importance of environmental disclosure for firms and policymakers in emerging markets.