Regulators around the world have started to force firms to report carbon emissions compulsorily, but it is unclear whether and how such mandates may affect firms' operational efficiency. While some practitioners expect the mandates to make firms' environmental information more transparent and comparable, enabling them to address any inefficiency identified, others view the mandates as "a meaningless addition of a new regulatory burden" that might hurt firms' efficiency. Our research tackles this important and timely issue by conducting a quasi-natural experiment in the UK, in which firms listed on the London Stock Exchange have been required to report carbon emissions annually since 2013. Specifically, we utilize propensity score matching and difference-in-differences methodologies to quantify the impact of the new reporting requirement on the operational efficiency of the UK firms concerned. We also explore how the impact may vary across UK firms with different reporting behaviors and operating in different environments. Overall, our research provides solid empirical evidence that helps resolve the controversy about the operational implications of mandatory carbon reporting and offers important implications for future research and practices.
