The value relevance of green taxonomy alignment: The mediating role of ESG disclosure quality among Malaysian listed companies

Abstract

Capital markets are increasingly expected to support environmental objectives while maintaining financial value creation. However, the credibility of sustainability reporting remains a major concern, as uneven ESG disclosure quality may expose investors to greenwashing risk and symbolic corporate communication. Although the relationship between ESG disclosure and firm value has been widely discussed, the value relevance of green taxonomy alignment remains underexplored, particularly in relation to its effect on ESG disclosure quality. This study develops a conceptual framework that examines how green taxonomy alignment may influence firm value through ESG disclosure quality among Malaysian listed companies. Drawing on Signalling Theory, the study positions green taxonomy alignment, contextualised through Bank Negara Malaysia’s Climate Change and Principle-based Taxonomy (CCPT), as a credibility mechanism that strengthens the reliability of sustainability claims. ESG disclosure quality is proposed as the mediating channel that translates taxonomy alignment into credible, comparable and decision-useful information for investors. The study contributes to the sustainable finance literature by reframing taxonomy alignment as an antecedent of ESG disclosure quality, highlighting the role of disclosure quality in transmitting credible sustainability signals, and providing a conceptual foundation for future empirical testing in Malaysia’s evolving sustainable finance landscape.