Environmental Information Disclosure Can Reduce The Cost Of Equity Financing

Under the background of Integrated Reporting, this paper researched the environmental information disclosure of heavy pollution industries in China and empirically tested that weather environmental information disclosure could reduce the cost of equity capital. In recent years, China’s listed companies are trying to disclose environmental information from the perspective of non-financial information, and report environmental management performance to investors in order to meet their information requirements and reduce the level of information asymmetry with investors. China’s security regulators has already issued a number of regulations to guide enterprise’s environmental information disclosure. But weather those regulations and guidelines have been effectively implemented? Weather the quality of environmental information disclosure from listed companies in our country is high or not? Weather environmental information disclosure could help investors make scientific decisions? These questions all need to be answered by the empirical research of this paper.Firstly, under the guidance of the research background and significance, this paper put forward the research idea by the review of related literature at home and abroad. Secondly, this paper defined the relevant concepts and chose the model of OJN to calculate the cost of equity capital. And then based on the theory of the relationship between environmental information disclosure and the cost of equity capital, this paper summarized the pathway that how the former one could influence the latter one. In the part of empirical research design, this paper divided environmental information into financial environmental information and non-financial environmental information, put forward four testable assumptions in all, and established the environmental information disclosure index through the content analysis method to measure the quality of environmental information disclosure. Then, this paper applied analysis methods of descriptive analysis% correlation analysis and multiple linear regression analysis, empirically tested how environmental information disclosure in its entirety、financial environmental information disclosure and non-financial environmental information disclosure could influence the cost of equity capital on the basis of heavy pollution industries’date from SHANGHAI STOCK EXCHANGE in 2010-2011. At last, according to the research conclusions, this paper got some enlightenment and proposed policy suggestions from the perspective of the investors, the listed companies and the regulators.The empirical results show that the current situation of environmental information disclosure of listed companies from heavy pollution industries is not very desirable in 2010-2011. The quality of disclosure is very low, it shows a trend of rising in the research period but the trend is not obvious. Besides, all assumptions pass the test, which means improving the quality of environmental information disclosure can observably reduce the cost of equity capital. Compared with non-financial environmental information, the effect of financial environmental information disclosure that reducing the cost of equity capital is more significant. Finally, through the expanding of the existing research conclusions, the research finds that integrating environmental information into the future’s enterprise Integrated Reporting practice has certain necessity and rationality.