CARBON ACCOUNTING PRACTICES AND FIRM MARKET VALUATION IN EMERGING MARKETS

Abstract

Abstract

This study examines the relationship between carbon accounting practices, carbon intensity, and firm market valuation in emerging markets, with particular emphasis on disclosure quality, emissions exposure, and sectoral heterogeneity. Drawing on stakeholder, signaling, legitimacy, and institutional theories, the study adopts a mixed-methods empirical design that integrates content analysis with panel econometric techniques. A novel Carbon Accounting Practices Index (CAPI) is constructed through systematic content analysis of corporate sustainability and annual reports, capturing the scope, credibility, and standard alignment of firms’ carbon accounting practices. Carbon intensity is measured using emissions scaled by revenue and alternative financial denominators, while firm market valuation is proxied primarily by Tobin’s Q. Using a panel of listed non-financial firms from selected emerging markets over a multi-year period, the results reveal that carbon accounting practices exert a positive and statistically significant effect on firm market valuation, indicating that high-quality carbon accounting functions as a value-relevant signal to investors. In contrast, carbon intensity is negatively associated with market valuation, reflecting investors’ pricing of climate transition and regulatory risks. Sectoral analyses further demonstrate that these valuation effects are significantly stronger in high-carbon industries, where regulatory exposure and investor scrutiny are more pronounced. Robustness checks using alternative valuation measures and emissions proxies confirm the stability of the findings. The study contributes to the carbon finance and sustainability accounting literature by jointly examining disclosure quality and emissions performance within an emerging market context. The findings offer important implications for policymakers, investors, and corporate managers seeking to enhance market transparency and support the transition toward low-carbon economic systems.