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

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  • Iftikhar, Kainat
  • Bagh, Tanveer
  • Shabbir, Muhammad Nadir

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.

Suggested Citation

  • Iftikhar, Kainat & Bagh, Tanveer & Shabbir, Muhammad Nadir, 2025. "The dichotomy of corporate litigation risk in shaping ESG disclosure: Does green innovation matter?," Research in International Business and Finance, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:riibaf:v:75:y:2025:i:c:s0275531924005373
    DOI: 10.1016/j.ribaf.2024.102744
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    More about this item

    Keywords

    Corporate litigation risk; ESG disclosure; Green innovation; Financial constraints;
    All these keywords.

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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