The synergetic impact of environmental and innovation information disclosure on corporate financial performance: An empirical study based on China coal listed companies

Highlights

• Environmental and innovation information disclosure (EID and TIID) promote each other.

• Both EID and TIID harm financial performance of listed coal enterprise.

• Under the synergy of EID and TIID, the financial performance decline is more obvious.

Abstract

Due to the industrial features of high resource dependence and high state-owned shares, the impact of the environmental information disclosure (EID) and technological innovation information disclosure (TIID) on the financial performance of Chinese coal listed companies remains unknown. This paper selects 26 listed coal companies in China from 2014 to 2018 as empirical research objects, combined with the production characteristics of the coal industry to build indicator systems. Several regression models are applied to verify the respective and synergistic impacts of EID and TIID on the corporate performance of listed coal enterprises in China. Results show that there is a significant positive correlation between EID and TIID of coal companies, but both of them have a negative impact on corporate financial performance. Furthermore, the synergistic effect of EID and TIID will make the negative impact be more obvious. The policy of capacity reduction in the coal industry might be the main reason for the decline in financial performance caused by information disclosure. Even so, corporate information disclosure should be encouraged, and we wish the results of the study can help government departments recognize the current dilemma faced by coal companies and take effective measures to help them overcome difficulties.

Introduction

From the perspective of information transfer theory, the impact of corporate information disclosure on the company itself and the society is becoming more and more complex. China's listed coal companies in the socialist market economy system are more inclined to adopt a game strategy rather than completely disclosure information about their ecology and innovation activities. This paper establishes a link between the environmental disclosure (EID) and innovation disclosure (TIID) of Chinese listed coal companies and the financial performance of enterprises (Q and EVAPS) while exploring the independent and synergistic influences of EID and TIID on the financial performance of Chinese coal enterprises with high resource dependence and a high proportion of state-owned shares. We also attempt to explain the reasons for these impacts in the context of national policies.

According to China's Securities Law and Company Law, listed companies need to prepare and publish their business performance regularly in the form of reports, and we call this process as information disclosure of listed companies (Gong, 2019). Of all kinds of information disclosure in the enterprises, environmental protection and technological innovation information can intuitively reflect the enterprise's core competitiveness and development potential. Managers have an obligation to society to disclose accurate information about innovation and environmental protection to realize the supervision of their own, at the same time, shareholders also need to obtain key clues that are helpful for them to make investment decisions from the information on environmental protection and technological innovation published by enterprises. The traditional view is that the more disclosure of information, the higher the liquidity in the market, the enterprise cost of capital is also decreasing (Verrecchia, 1999). Since 2006, China has continuously issued relevant standards and regulations to standardize the disclosure of compulsory content such as financial indicators and internal governance of listed companies. As national and social requirements for environmental quality have become higher and higher, the requirements for corporate environmental information disclosure have become more stringent, and some highly polluting companies even have to disclose environmental information under mandatory demand. In contrast, because the threshold for research and development innovation is high, and effective corporate technological innovation information often contains internal patents and confidential information, the mandatory disclosure of technological innovation information is not realistic for a while. At present, national laws and regulations on the disclosure of technological innovation information of enterprises have issued guidance documents only on the content and form of disclosure. The disclosure of technological innovation information still mainly depends on voluntary participation of enterprises.

Till now, many scholars have researched the role and significance of environmental and innovation information disclosure. Although they have not reached a unified conclusion, the results of these studies have provided a good guide for us to further discuss the synergy of environmental and innovation information. Some scholars believe that from the perspective of signaling theory, environmental information disclosure can bring positive effects to corporate performance by improving corporate environmental performance (Ioannou and Serafeim, 2012) and social reputation (Teisl et al., 2002) or reducing corporate financing costs (Liu and Anbumozhi, 2009) and other approaches. However, if managers are self-interested in information disclosure decisions, excessive exaggeration of environmental performance may hurt companies (Lewellen et al., 1996). Similarly, at the same time that corporate R&D activities bring economic benefits to the company (da Silva et al., 2013), there is also a risk of providing free-rider opportunities to competitors (Jia, 2019). Existing research confirms that there is a certain relationship between technological innovation and environmental protection in enterprises (Yuan and Zhang, 2020), and they mostly start from macro policies (Brunel, 2019; Herman and Xiang, 2020; Makkonen and Inkinen, 2018) or funding (Aldieri et al., 2019) perspective. Unfortunately, the research on the synergy between environmental and innovation information disclosure on corporate performance has not been studied by researchers, which will be the focus of this study.

Besides, different research objects will yield different results. At present, scholars studying environmental information disclosure mainly focus on heavily polluting industries (chemical industry, power industry, etc.), while scholars studying innovation information disclosure mainly focus on high-tech industries (computer, communication industry, etc.). When considering environmental information and innovation information at the same time, we need to find an industry where its production activities will cause pollution to the environment, and its long-term sustainable development relies heavily on technological innovation. After the “Thirteenth Five-Year Plan” was put forward, the state has higher requirements for ecological construction and environmental protection in various industries, prompting them to eliminate high-consumption, high-polluting, high-emission industries and develop green and low-carbon industries. As a traditional energy industry, coal mining has been criticized for high environmental pollution, however, coal itself is essential for industrial production and social life. The road that China's coal industry has to take can only be to transform to a high-value-added emerging green low-carbon industry and use innovation to drive ecological construction, so the coal industry has gradually shown an increasing demand for innovation, which is the main reason why this paper takes listed coal companies as the research object.

In summary, the main contribution of this article is: for the first time, the company's environmental information disclosure and innovation information disclosure are linked, and the impact of technological innovation on environmental protection (de Miguel and Pazó, 2017) is used as a basis to study the relationship between the two and the synergistic effect on the financial performance of enterprises. Different from most scholars' method of distinguishing between qualitative and quantitative indicators, the focus of this article is whether the company has disclosed relevant information and the level of detail of the disclosure. The results of statistical analysis show that the increase of the level of technological innovation information disclosure will promote the disclosure of environmental information by enterprises, but the disclosure of environmental and innovation information both will bring negative growth to the financial performance of coal companies, and this negative impact will be more significant due to the synergy between environmental and innovation information disclosure.

Another main contribution of the article is to explain the reasons for the regression results in combination with national policies and the actual situation of the industry development stage. Under the background of the Chinese “Thirteenth Five-Year Plan” and the adjustment of industrial structure, environmental protection and the transformation of the ecological economy are imminent. Part of the company's environmental investment is used to eliminate old equipment, purchase new equipment, improve traditional processes, and introduce new processes, and another part is to increase investment in pollution control. As the industry continues to intensify competition, the demand for innovation in production technology increases. Given the above, if the coal industry wants to increase the amount of information disclosed in environmental protection and technological innovation, it must inevitably increase the capital investment and construction of the corresponding projects. Coal companies are required to gradually reduce their production scale and replace high-speed development with high-quality economic development. That is to say, for a while, coal companies will face the dilemma of “living beyond its means”. Although such transformation and adjustment are necessary for the coal industry, from the perspective of book results, environmental and innovation information disclosure will instead bring a decline in the financial performance of coal enterprises.

Taken together, we first draw on the research results of many scholars, taking listed coal enterprises as the main research body, and make assumptions about the synergy of environmental and innovation information disclosure to corporate performance. Then we collect and sort out environmental and innovation related information disclosed by 26 Chinese coal listed companies from 2014 to 2018 before establishing an information disclosure index system based on industry production characteristics, and use these indicators to make preliminary evaluations and scores of environmental and innovation information disclosure in various enterprises and years. At last, we use statistical analysis methods to empirically study and explore the relationship between corporate environment and innovation information disclosure, as well as the synergistic impact of the two on the financial performance of coal enterprises.

The rest of the paper is organized as follows: section 2 reviews previous scholars' research results on environmental protection and technological innovation information disclosure, and points out research gaps in the research results of scholars at this stage, indicating the research focus of the paper. Section 3 makes assumptions about the possible relationships between the environmental and innovation information disclosure, and the impact of the two on the financial performance of coal companies in the basic theoretical background. Section 4 explains the meaning and measurement of variables and establishes the regression models. Section 5 mainly conducts empirical research and then describes and discusses the regression results, while section 6 is a summary of the overall content of the article.