Does water disclosure cause a rise in corporate risk-taking?—Evidence from Chinese high water-risk industries

Abstract As the global water crisis has become the third biggest threat to the world, how to deal with water-risk becomes essential for enterprises. Water disclosure is an important means for enterprises to convey information about water management and water risk to external stakeholders. Based on signaling theory and legitimacy theory, this study examines the impact of water disclosure on corporate risk-taking and the moderating effect of organizational legitimacy. The study chooses 334 listed companies in Chinese high water-risk industries and selects 2010 to 2015 as the water disclosure observation period. The results show that water disclosure is negatively related to corporate risk-taking, and the relationship between the two varies with the difference in property rights and the relative level of water information disclosure. A further study finds that, organizational legitimacy plays a significant moderating role on the impact of water disclosure on corporate risk-taking. The study reveals the impact mechanism of water disclosure on corporate risk-taking, will cause more effective water disclosure and water management that is beneficial to the continued development of enterprises and entire social economy.