The Suppressing Role of Market Liquidity: Unpacking the Complexity in the Carbon Disclosure Value Creation Pathway

Abstract

This study explores the nuanced role of market liquidity (TR) as a suppressor in the relationship between Carbon Disclosure Quality (CDI) and Enterprise Value Creation (VL). Drawing on signaling theory and stakeholder theory, the research employs Structural Equation Modeling (SEM) based on dual-source data from 277 listed firms in high-emission industries in China. While CDI demonstrates a direct positive impact on VL and exhibits significant mediation through financing cost, customer satisfaction, and corporate reputation, market liquidity reveals a unique suppressing effect. Specifically, the SEM results indicate that CDI has a significant positive effect on enterprise value creation (β = 0.32, p < 0.01), whereas market liquidity exerts a suppressing indirect effect (β = –0.06, p < 0.05). These effects are validated using Bootstrap resampling (n = 10,000), and model fit indices confirm strong validity (CFI = 0.978; TLI = 0.967; RMSEA = 0.038). The findings highlight the potential for carbon disclosure to generate ambiguous signals in transitional ESG environments, complicating investor interpretation and value realization. This study contributes to the ESG literature by identifying a novel suppressor variable and offers strategic recommendations to enhance the clarity and effectiveness of ESG communication and carbon disclosure practices.