Selection Bias in ESG Reporting: Implications for Environmental Performance and Firm Valuation

This paper investigates the relationship between environmental performance and firm valuation, accounting for the strategic nature of ESG disclosure. Using a panel of Italian listed firms (2013–2023), we implement a two-step Heckman correction model to address self-selection bias in environmental reporting. Our analysis reveals that firms with stronger governance structures—especially board attendance, independence, and CSR committees—are more likely to disclose environmental data. Correcting for this bias, we find a positive and significant association between environmental commitment and Tobin's Q. The results are robust across different thresholds of environmental commitment. These findings highlight the financial relevance of environmental responsibility and underscore the need for supportive policies in mandatory ESG disclosure regimes. Without addressing self-selection, naïve estimates would systematically underestimate the true economic value of environmental engagement.