How News Features Of Environmental Pollution Exposures Affect Investor Responses

Since the reform and opening up,China’s economy has experienced decades of rapid growth and created one "China miracle" after another.However,behind this remarkable economic growth,the increasingly serious environmental pollution problem is restricting the sustainable development of the economy.In 2017,pollution prevention and control appeared in the report of the 19 th national congress of the communist party of China(CPC)and became one of the three major challenges in building a moderately prosperous society in all respects.And how to better play the role of public opinion supervision is important for ecological environmental protection.Although China has gradually stepped into the information age,and media reports on enterprises involved in environmental pollution are everywhere in cyberspace,however,how to report on enterprises’ environmental violations so as to better remind the investors and better urge the enterprises involved to rectify in a good and fast way is still a problem to be studied.At present,although ordinary people pay more and more attention to the adverse impact caused by environmental pollution events,some investors still lack professional knowledge about environmental regulations and emission standards,presenting a state of "rational ignorance".On the part of the government,the punishment is always by fine,not by regulation.At the same time,enterprises do not pay enough attention to environmental pollution control and information disclosure,and try to reduce supervision by reducing information disclosure.The low cost of environmental violation,the imperfect system,the insufficient awareness of investors and the ineffective supervision of media make environmental pollution incidents still occur frequently in China.This paper takes 78 environmental pollution incidents of listed companies exposed by the media during the ten years from 2010 to 2019 as samples to study the relationship between the degree of investor reaction and the news characteristics of environmental pollution incidents exposed by the media.To get access to environmental pollution event data of listed companies,this paper takes wind database’ financial news section,uses "environmental pollution" as keywords,retrieve a total of 1340 news,which related to listed companies between 2010 and 2019.Based on the "violation punishment database" in the "news database" in the Guo Taian database(CSMAR),using "environment" and "pollution" as keywords,we retrieve all the incidents of listed companies receiving violation punishment for environmental pollution from 2010 to 2019.Then we delete those that were not disclosed by the media but only announced by the company or the regulatory department,and those that were not listed or can’t target one company,78 valid incidents were obtained eventually.Then the event is further classified according to the three sets of news features: new media or traditional media,in-depth coverage or restatement coverage,follow-up coverage or one-time coverage.In order to verify whether the exposure of environmental pollution events will bring negative reaction in the investors of listed companies,that is,whether the stock price will decline,this paper adopts the event study method,measure the reaction degree of investors with the cumulative abnormal rate of return.After the first step of empirical test,in order to obtain the results of how the three groups of news characteristics affect investors’ reaction respectively,this paper selects the cumulative abnormal rate of return of the event window when the market reaction reaches the maximum as the explained variable,takes three groups of news characteristics to be studied as the explanatory variable,and conducts empirical test with the multiple regression model,and used the ordered logit model for robustness test.According to the empirical results of the first step,the exposure of environmental pollution has caused a negative impact on the stock prices of most companies,and investors have reacted negatively to the companies that have caused environmental pollution,the companies that have polluted the environment have been punished by the market.On the day the environmental pollution was first reported by the media,share prices fell by an average of 0.82%.During the 1-day to 3-day window period,negative reactions gradually increased,reaching a maximum of 2.76%.Further empirical results show that the coefficients between the three variables of emerging media coverage,in-depth coverage and follow-up coverage and the degree of investor reaction are significantly negative,indicating that emerging media coverage,in-depth coverage and follow-up coverage can significantly enhance investors’ negative reaction.Each addition of an emerging media coverage,an in-depth coverage,and a follow-up coverage increased investors’ negative reaction by 5.448%、3.521% and 4.256%,respectively.This paper further analyzes the reasons of these results,the possible reasons are that many traditional media are policy-oriented,their main audience is not investors,but enterprises and regulatory departments,while most emerging media are marketoriented,and their reports will be more widely disseminated among investors.In-depth reports can provide more accurate first-hand information,which greatly improves its authenticity and persuasion.Besides,in-depth reports can also dig into the influence and meaning behind the event,so it is more likely to attract the attention of investors.Tracking reports can generally make a deeper analysis of the events and echo with the first reports,so as to further arouse the attention of investors and enhance the response of audiences.Finally,based on the empirical results and possible reasons,this paper puts forward corresponding suggestions from the perspectives of media,regulators,investors and enterprises.This paper expands the research on environmental pollution and media supervision,which not only provides effective suggestions on environmental protection and governance in China,but also contributes to enhancing the role of media supervision,protecting investors’ interests and improving the efficiency of capital market.