부산대학교 도서관

While issues of climate change and energy shortages have received more attention recently, investors have gradually focused on firms' environmental information, such as carbon emissions and energy consumption in recent years. Under this trend, the effect of environmental information on firms is worthy of exploration. This study investigates whether a firm's carbon emissions and energy consumption affect its earnings informativeness. Following the method of prior research, this study employs the earnings response coefficient as a proxy of earnings informativeness. With the data of Taiwanese listed and over the counter (OTC) companies from 2013 to 2019, the empirical results show that a firm's carbon emissions and energy consumption are negatively associated with earnings informativeness, indicating that earnings informativeness is lower for firms with higher carbon emissions and energy consumption. In additional tests, we show that firms with higher energy consumption and carbon emissions engage in more real earnings management. Furthermore, we find that firms with higher carbon emissions reduce their value relevance of earnings and increase their value relevance of equity book value, suggesting that investors rely more on equity book value than on earnings to value stock prices when firms have higher carbon emissions. We also show that firms with higher energy consumption reduce their value relevance of earnings. These findings are robust to the Two Stage Least Square (2LS) model and several additional tests. Overall, the evidence sheds light on the importance of considering underlying environmental information in interpreting the financial reports.