Market-Based Environmental Policy And The Quality Of ESG Information Disclosure

In the context of China’s ecological civilization construction strategy and the steady implementation of environmental regulation policies,enterprises are currently disclosing information on the environment,social responsibility and corporate governance as a whole.Compared with CSR disclosure,ESG disclosure has a richer connotation and explicitly includes"governance"factors related to environmental and social factors.It has been shown that environmental regulation significantly affects the quality of ESG disclosure,but most of the studies are based on the traditional command-based environmental regulation policy.Compared with traditional environmental regulation policies,market-based environmental regulation policies are more likely to influence corporate behavior by using both government and market regulation.As a market-oriented environmental regulation policy,carbon trading policy constrains enterprises’CO₂emissions to achieve"emission reduction"by controlling enterprises and allocating initial carbon emissions,setting up trading rules and compliance mechanisms.On the one hand,the quality of ESG information disclosure will be improved as companies will increase their information transparency to reduce the additional cost of market-based environmental regulation,to obtain proprietary resources and to maintain their competitive advantage.On the other hand,due to the constraints of resources and cash flow,enterprises,as"rational economic agents",are often forced to give up high-investment and high-uncertainty ESG behaviors,and the quality of corporate ESG information disclosure will decrease.Based on the above analysis,this paper empirically examines this issue and explores its mechanism.In this paper,we use the event that carbon emissions trading policy is piloted in seven provinces and cities,and apply the PSM-DID method to select listed companies in Shanghai and Shenzhen from 2010 to 2019 as research samples to analyze whether carbon emissions trading policy,a market-based environmental regulation tool,has an impact on the quality of corporate ESG information disclosure before and after the pilot,as well as in the pilot and non-pilot areas.ESG information disclosure quality is affected.The study finds that the implementation of carbon trading policy can effectively promote the quality of corporate ESG information disclosure.Environmental Regulation will effectively reduce the agency costs of enterprises to improve the quality of ESG information disclosure.The environmental subsidies provided by the government and the innovation investment by the enterprises will motivate the enterprises to disclose higher quality ESG information under the implementation of market-based environmental regulation policy.It is further found that compared with high information asymmetry,rich resource base and non-heavy polluting firms,lower information asymmetry,weaker resource base and heavy polluting firms receive more attention from the government and the public and are more likely to be subject to environmental regulation tools,so the promotion effect of environmental regulation on the quality of ESG information disclosure of such firms is more pronounced.The main marginal contributions of this paper are:First,this paper provides new ideas on the factors influencing the quality of corporate ESG disclosure.It has been shown in the literature that there is an association between environmental regulation and the quality of corporate ESG disclosure.However,most of the past studies have been conducted from the perspective of traditional command-based environmental regulation rather than from the perspective of market-based environmental regulation.Due to the limited regulatory effect of command-based environmental regulation,in recent years,the country has advocated the use of market-based environmental regulation to improve the ecological environment.There is still a lack of research on the impact of market-based environmental regulation policies on the quality of corporate ESG information disclosure,and the research in this paper can supplement the relevant literature studies.Second,this paper extends the research on the results of carbon emissions trading policies.Most of the existing literature on carbon emissions trading policies focuses on the level of carbon emissions rights affecting corporate behavior,such as carbon emissions effect and emission reduction mechanism,corporate innovation,and corporate environmental protection investment.Some of the literature has explored the relationship between carbon emissions trading and corporate business outcomes,such as corporate value and corporate investment efficiency.There is little literature on the impact of carbon trading policy on the quality of corporate ESG information disclosure,so the results of the empirical analysis in this paper can enrich the research on the results of this policy.