The dichotomy of corporate litigation risk in shaping ESG disclosure: Does green innovation matter?

Kainat Iftikhar, Tanveer Bagh () and Muhammad Nadir Shabbir

Research in International Business and Finance, 2025, vol. 75, issue C

Abstract: ESG disclosures have become critical corporate imperatives amid intense regulatory oversight and stakeholder demands. We examine the profound impact of litigation risk on ESG disclosure strategies among Chinese listed firms, which provides new insights. Employing panel fixed effects, dynamic panel generalized method of moments, and propensity score matching techniques, we document robust evidence that heightened litigation risk significantly enhances ESG disclosure. Our analysis reveals how firms under greater litigation pressure enhance their ESG disclosures as a risk mitigation mechanism. The study uncovers that green innovation acts as a significant moderator, strengthening ESG disclosure while attenuating litigation effects. Cross-sectional analysis demonstrates that litigation risk affects ESG disclosure more in state-owned enterprises and firms with lower financial constraints. Our analysis on firm life cycle indicates that ESG disclosure reaches its peak during growth phases, while the influence of green innovation declines at maturity. This research advances the literature with a causal link between litigation risk and ESG disclosure, and offers valuable insights for regulators, managers, and stakeholders in corporate sustainability and risk governance.

Keywords: Corporate litigation risk; ESG disclosure; Green innovation; Financial constraints (search for similar items in EconPapers)
JEL-codes: D83 E44 K41 Q56 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:75:y:2025:i:c:s0275531924005373

DOI: 10.1016/j.ribaf.2024.102744

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