The Impact of Environmental Information Disclosure in the “Carbon Trading Pilot” Project on the Financial Performance of Listed Enterprises in China

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

Comments

I would like to congratulate the authors for composing a study on Carbon Trading Pilot policy. However, there are some points that should be addressed before moving to the publication stage.

Minor comments

·       Some acronyms (e.g. SMEs and DID) were used without first defining them. All acronyms should be spelled out for first use.

·       Some of the figures (e.g. Figures 2, 4, 6, and 8) are difficult to interpret because of the colour scheme used. Consider revising for better clarity.

·       There are some minor grammatical and typographical errors in the manuscript that should be corrected (e.g. inconsistent use of American and British English spellings).

Major comments

·       The introduction does not explicitly state the research questions or hypotheses, making it difficult to assess how well the study addressed its aims.

·       The mechanism analysis section is relatively brief. Expanding the interpretation of these results strengthens the results of this study.

·       The authors did not adequately discuss the limitations of their study. A more comprehensive discussion of these limitations would strengthen the credibility of the paper.

·       The Policy Implications section is underdeveloped. Based on these findings, the authors should provide recommendations that are more specific and actionable.

·       The authors did not sufficiently address the potential for reverse causality in their analyses. They should discuss this issue and how it may affect the interpretation of their results.

·       This study lacks a robust theoretical foundation to explain the relationship between environmental policies and firm performance, which weakens the interpretation of the results.

·       The use of total comprehensive income as the sole measure of financial performance is limited. The inclusion of additional metrics would provide a more comprehensive analysis.

·       The authors did not adequately address potential selection bias in their sample, which could affect the generalisability of their results.

·       The threshold effect analysis (Model 7 in Table 4) is presented without an adequate explanation of its methodology or interpretation, despite its importance to the study's findings.

·       The focus on total liabilities as the sole mechanism is overly simplistic, and may not capture the full complexity of how environmental policies affect firm performance.

·       While the authors mention using DID to address endogeneity, they do not provide sufficient detail on how to address potential endogeneity issues.

·       The study period (2009-2020) includes significant economic events, such as the COVID-19 pandemic, but the authors do not adequately address how they accounted for such external shocks in their analysis.

·       The literature review section can be more concise and focused on. It currently covers a broad range of topics without clear organisation or transitions between subsections.

·       The conclusion section can be improved by explicitly linking the findings to the initial research questions or hypotheses.

·       Heterogeneity analysis lacks a clear rationale for the chosen categories (e.g. industrial vs. non-industrial, listing date). The authors should justify these choices based on theory or prior literature.

Comments on the Quality of English Language

·       There are some minor grammatical and typographical errors in the manuscript that should be corrected (e.g. inconsistent use of American and British English spellings).

Author Response

Please see the attachment

Author Response File: Author Response.pdf

Reviewer 2 Report

Comments and Suggestions for Authors

Reviewer Comments:

The manuscript selects China’s “Carbon Trading Pilot” policy as the research subject, a topic of significant policy relevance and practical impact in the current context. The study employs the Difference-in-Differences method and a fixed-effects model with panel data, effectively addressing endogeneity issues and ensuring the robustness of the results. Additionally, the paper introduces a threshold effect model to explore the nonlinear impact of environmental disclosure levels on corporate financial performance, enriching the study's depth and breadth. However, there are several areas where the manuscript could be further improved. The following suggestions are provided for the author’s consideration:

1.Enhance the Literature Review: While the manuscript provides a comprehensive summary of existing research, it lacks a clear focus. It is recommended to refine the literature review by concentrating on the most relevant studies that directly support the development of your research background. Ensure that each cited reference explicitly contributes to constructing your research context.

2.Elaborate on the Threshold Effect: The introduction of the threshold effect model adds depth and breadth to the research. However, the explanation and theoretical basis for the threshold value are not sufficiently detailed. It is suggested that the author provide a more thorough interpretation of the threshold value and its underlying theory.

3.Improve Language and Grammar: The manuscript is logically structured and well-organized, but there are some grammatical errors and instances of inappropriate word usage. For example, in the sentence "We use the China 'Carbon Trading Pilot' policy…", the phrase "the China" is unnatural. It is recommended to revise this to "We use China’s 'Carbon Trading Pilot' policy as a quasi-natural experiment...".

Another example is the sentence, "The companies that disclosed the policy are the treatment group, and the control group consists of companies that did not disclose the policy." Here, the structure "The companies that disclosed the policy…" is complex and repeats "the policy." A suggested revision is: "The companies that disclosed the policy form the treatment group, while those that did not disclose it form the control group."

There are several other similar language and grammatical issues throughout the paper. Addressing these will enhance the manuscript’s fluency and readability.

Author Response

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Author Response File: Author Response.pdf

Reviewer 3 Report

Comments and Suggestions for Authors

1. The topic of the article seems relevant. The main focus of the article is an empirical study of the impact of environmental disclosure within the CO2 emissions trading pilot project on the financial performance of enterprises. At the same time, a research sample including listed companies is reasonably used. This study answers very important research questions. First, how does environmental disclosure within the CO2 emissions trading pilot project affect the financial performance of different types of enterprises? Second, does the level of environmental disclosure have threshold values, after which the impact on the financial performance of enterprises changes? Third, how do the spatio-temporal characteristics of the impact of environmental disclosure within the CO2 emissions trading pilot project on the financial performance of enterprises change? These research questions are very significant.

2. There are a number of empirical studies of the relationship between environmental compliance standards and the quality of corporate revenues. All of them are conducted within the framework of developed economies. The merit of the authors of this article is that they conducted an original empirical analysis of the causal effect of the impact of environmental disclosure within the CO2 emissions trading pilot project on the financial performance of enterprises. I see the originality of this work in the fact that it is based on empirical material from the corporate sector of a developing country. This is of great importance not only for China, but also for other developing countries that are starting or planning to start trading in CO2 emissions.

3. In my opinion, this article adds some important justifications to the subject area of ​​environmental disclosure in the process of emissions trading. First. This study substantiates the conclusion about the heterogeneity of the impact of environmental disclosure on the financial performance of enterprises. The authors substantiate the mechanisms of the short-term and long-term impact of environmental disclosure on the financial performance of enterprises. Second. The authors substantiate that there is a significant positive effect on the financial performance of an enterprise when the level of environmental disclosure of an enterprise exceeds the threshold value. This value is determined empirically. If the level of environmental disclosure of an enterprise exceeds 10.074, then an additional positive effect will be observed. Accordingly, the author's conclusion that enterprises should be encouraged to disclose as complete and detailed environmental information as possible seems justified. This will help improve the financial performance of enterprises.

4. I liked the article. To make this article more understandable and more likely to be cited, I would recommend some improvements.

First, I would recommend simplifying the title of the article to make it more informative. For example:

The Impact of Environmental Information Disclosure in the Carbon Emissions Trading Pilot Project on the Financial Performance of Listed Enterprises in China.

Second, I would recommend clearly formulating the objective of the study and reflecting this objective in the Abstract and Introduction.

Third, I would recommend providing more complete information and characteristics of the sample of enterprises used for the analysis.

Fourth, I recommend adding a Discussion section. In this section, I recommend conducting an analysis of the confirmation of the hypotheses, verifying them with known similar studies, and providing the limitations of this study.

5. The conclusions correspond to the objective of the study. I confirm that the objective of the study has been achieved in the work, significant results have been obtained. They are presented in the Conclusion. The theoretical and practical significance of the research results can also be shown.

6. The references are appropriate. The article uses a large array - 86 sources. Of these, 33 sources are dated by the last five-year period: 2019-2024. The share of such sources is 38%. It is very good that the literature is relevant on this topic.

7. All tables and figures in the article are clear and relevant. The data are presented for a long period of 2009-2020. The research method is clear and well demonstrated in the work.

Author Response

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Author Response File: Author Response.pdf