Does More Voluntary “Green” Information Disclosure Cut Down the Cost of Equity: Heavy Pollution Industries in China

Abstract Focusing on the unique background of the coexistence of mandatory and voluntary disclosure of environmental information by domestic companies in heavy pollution industries for which is lost sight of in the existing literature. The purpose of this paper is to identify, under the premise of compulsory disclosure of environmental information in the financial report and separate environmental report, whether the further voluntary environmental information disclosure in the corporate social responsibility (CSR_E) captures the discount from investors during equity financing. Employing the sample of 4390 China’s A-share listed companies in the heavy pollution industries between 2010 and 2018, we adopt Python to conduct texture analysis and image recognition, applying the fixed effect regression model to text hypothesizes, within the robust analysis, our empirical results show that the CSR disclosure, higher quality of CSR reports, greater extent of CSR_E disclosure including accurate environmental investment information as well as the amount of graphs and texts all have the positive impact on the cost reduction of equity financing. Moreover, the degree of CSR_E disclosure in reducing cost of equity is 30 times that of CSR disclosure, which indicates that voluntary disclosure of environmental information is better to get extra discount of equity financing by satisfying favor of investors instead of keep silent on the basis of compulsory disclosure of environmental information. In addition, the charts have specific positive effects that’s not available for the text, the accurate quantitative environmental information creates more values for those enterprises disclosed. This study offers guidelines for regulatory authorities to explore the coordination effect of mandatory and voluntary disclosure policies, and achieve environmental governance and sustainable development of enterprises by improving their corporate governance.