Beyond Single-Theory Explanations: A Dual-Capacity Model of Carbon Disclosure Effectiveness in Sustainable Finance

Lin Oktris; Afzal Izzaz Zahari; Suharmadi; Hirdinis M.

doi:10.55845/jos-2026-22190

Authors

Lin Oktris Universitas Mercu Buana https://orcid.org/0000-0003-0123-9294
Afzal Izzaz Zahari Universiti Sains Malaysia
Suharmadi Universitas Mercu Buana
Hirdinis M. Universitas Mercu Buana

DOI:

https://doi.org/10.55845/jos-2026-22190

Keywords:

Carbon Disclosure, Investor Decision-Making, Sustainable Finance, Systematic Literature Review, Dual-Capacity Mechanism

Abstract

Carbon disclosure has emerged as a central mechanism of sustainable finance, yet its effectiveness in influencing investor decision-making remains theoretically fragmented across legitimacy, signaling, stakeholder, and institutional theory. Applied in isolation, these frameworks generate contradictory findings and leave three gaps unresolved: the absence of integrative frameworks explaining simultaneous mechanism operation, the lack of dynamic models accounting for temporal strengthening, and insufficient boundary condition specification across contexts. This systematic literature review synthesises 44 empirical studies published between January 2015 and June 2025, identified through a Scopus search conducted in July 2025 following PRISMA 2020 guidelines, with inter-rater reliability of k = 0.85 at screening and k = 0.82 at full-text assessment. Four mechanisms are identified: information asymmetry reduction (75% of studies; median b = 0.24), signaling of management quality (57%; b = 0.18 to 0.35), risk communication (50%; b = 0.08 to 0.35), and legitimacy building (39%; b = 0.06 to 0.28). These mechanisms operate simultaneously, with relative dominance shifting across sectors and contexts. Disclosure-investment relationships show temporal strengthening, with median effect sizes rising from b = 0.12 in 2015 to 2018 to b = 0.27 in 2022 to 2025. Three contributions are proposed: a dual-capacity extension of signaling theory suggesting that disclosure effectiveness may depend multiplicatively on information supply and market processing capacity, a cascading legitimacy theory offering one account of temporal strengthening through feedback loops between disclosure and infrastructure development, and boundary conditions specifying mechanism dominance across sectors. Findings carry implications for policymakers, managers calibrating sector-specific reporting, and investors building disclosure-informed portfolios aligned with net-zero objectives.

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Author Biography

Lin Oktris, Universitas Mercu Buana

Faculty of Economics and Business

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