Impact of Carbon Emission Trading Schemes on Firms' Environmental and Social Disclosure Under Institutional Pressure

Carbon emissions trading schemes (CETS) are a prominent market-based instrument for addressing climate change, yet their effects on corporate disclosure remain insufficiently understood. Drawing on institutional theory, we develop a pressure–capability–cognition framework to examine how CETS influence firms' environmental and social (E&S) disclosure and how institutional pressures and internal organizational factors shape heterogeneous disclosure responses. Exploiting the staggered implementation of China's CETS between 2013 and 2024 as a quasi-natural experiment, we employ a multi-period difference-in-differences design using 16,348 firm-year observations from 1682 listed firms between 2010 and 2024. We report three principal findings. First, CETS significantly increase the level of firm E&S disclosure, indicating that the influence of CETS extends beyond environmental reporting to social responsibility disclosure. Second, institutional pressures generate distinct disclosure strategies. Under coercive participation, CETS exhibits a marginally significant positive effect on social disclosure but no significant effect on environmental disclosure, consistent with a legitimacy compensation mechanism whereby firms offset environmental legitimacy deficits through low-cost, highly visible symbolic reporting. By contrast, under non-coercive participation, CETS significantly promotes both environmental and social disclosure, suggesting that firms use disclosure as a strategic signaling device. Third, operational efficiency negatively moderates the CETS–disclosure relationship, whereas managerial environmental focus positively moderates this relationship, revealing that internal capabilities and managerial cognition condition the effectiveness of institutional pressures in shaping disclosure outcomes. These findings contribute to sustainable operations management research by demonstrating how institutional pressures interact with operational capabilities and managerial cognition to shape corporate sustainability disclosure.