Does Environmental Information Disclosure Make Firms’ Investments More Efficient? Evidence from Measure 2007 of Chinese A-Listed Companies

Abstract

Using a sample of 2822 Chinese A-listed firms over the 2002–2015 period and the propensity score matching with difference-in-differences (PSM-DID) approach, we estimate the causality of environmental information disclosure (EID)’s impact on investment efficiency based on a quasi-experiment in 2007. This paper finds strong and robust evidence that there is a significant positive connection between EID and company investment efficiency in China. We further determine that heterogeneity of EID’s performance appears in the different settings of industry and subdivision industries. The significance of several sub-industries disappeared while the others retained larger significant coefficients than the whole industry case. The probability that an enterprise issues an environmental annual report has a significant positive link with investment efficiency in heavy industry, while this relationship is weakened or even not obvious in non-heavy polluting industries. Finally, we find that employee compensation serves as a mediator from which EID has an indirect effect on investment efficiency. Our results confirm that EID plays a vital role in firm-level capital allocation efficiency.