The Impacts Of Environmental Information Disclosure On Industrial Firms’ Competitiveness

In 2007,China’s State Environmental Protection Administration(EPA)passed the first nationwide initiative on environmental information disclosure(EID)-the Measures on Open Environmental Information for Trial Implementation(the Measures for short),which includes governments’ EID and firm’s EID.The former refers to the information obtained,produced or recorded by local environmental protection administrations when they fulfill environmental protection duties.The latter is the information recorded by firms,which are related to the environmental impacts of their business activities and environmental behaviors.The environmental information will be disclosed to the public through the media,the Internet or firms’annual environmental reports,and environmental protection administrations have the right to review the environmental information published by the firms.Enterprises will be publicly recognized by the EPA and have the priority to win special funds for environmental protections or subsidies for cleaning production,if they voluntarily disclose their environmental behaviors and comply with environmental regulations and laws.Different from the traditional command and control regulations,the Measures encourage enterprises to spontaneously save energy,reduce emissions and improve efficiency through EDI and rewards.To evaluate the effectiveness of the policy,we should not only inspect the benefits of pollution control and emission reduction,but also assess the additional costs which the Measures may cause,and the following potential impact on the competitiveness of firms.Trying to quantitatively analyze the influence,this paper bases its study on the database form China annual surveys of manufacturing firms(2008-2010),uses profitability and export to represent the competitiveness of enterprises and takes advantages of the pollution information transparency indexes(PITI)of 113 Chinese cities in order to evaluate the enforcement of the Measures across regions in China and years.With the help of OLS,FE estimations and instrumental variable methods,this paper empirically researches the effects of the Measures on industrial enterprises,profit and export.In addition,this paper also study the mechanism of EID on firms’ competitiveness,impacts on firms with different profitability and a series of auxiliary conclusions,including the roles of Internet,location and ownership,total effect etc.The empirical study of EID’s impacts on firm’s profitability shows that,the implementation of the Measures has a negative effect on firm’s profitability in the short run,which validates the hypothesis of "environmental regulation cost".However,for the firms whose sales margins are at the top 20%of the sample,their profitability was not affected by the Measures.In addition,it is found that the higher the Internet coverage in the city,firms located in the city tend to be more profitable.As for the mechanism,this paper finds that EDI leads to an increase of firm cost-sales ratio and unit selling cost,as well as a decrease of operation efficiency.It has not yet been found the connections between the Measure and firm’s innovation or future sales growth.In addition,the Internet for firm’s profitability is a "double-edged sword".On one hand,the Internet may help promoting innovation,improving product quality and reducing production costs.Thus,cost-sales ratio will decrease.On the other hand,the Internet has accelerated the spread of firm pollution information,in order to defend its public image and market shares,these polluting firms are forced to expand marketing inputs,resulting in an increase of unit sales costs.The empirical study of EID’s impacts on firm’s export shows that,the Measures have a negative impact on extensive margin and a positive effect on intensive margin,which means that EID inhibits export will and promotes export volume.What deserves to mention is that previous researches barely pay their attention to effects on binary margin of export.As for the control variables,it reflects that firm’s age,productivity,capital per capita and innovation are positively correlated with binary margin of export.Taking punishment cases against pollution and GDP per capita of city level into considerations,the robust test indicates that traditional environmental regulations exert a negative influence on binary margin of export.Coastal cities often produce a higher GDP per capita.It shows that firms from coastal cities are more likely to choose participating in exports,and their export volumes tend to be even higher.Chinese state-owned enterprises(SOEs)have more bargaining power than private firms and are favorably treated during government regulation as local officials’ promotion and income largely hinge on the share of SOEs in local economy as well as their performance.For the purpose of exploring roles of the ownership plays in the environmental information disclosure in regulations,another empirical research is introduced.It shows that the role of firm ownership can’t be determined in the analysis of export participation,but implies that the SOEs are more affected by the environmental information disclosure initiative in China.