Corporate Carbon Disclosure, Financing Structure and Total Factor Productivity: Evidence from Chinese Heavy Polluting Listed Corporates

: Low-carbon economy has become the current global economic development trend, and 9 Corporate carbon disclosure has attracted more and more attention from scholars and investors. This 10 paper creatively explores the mechanism of corporate carbon disclosure quality on total factor 11 productivity with financing structure as a mediating variable. The content analysis method is used to 12 construct a carbon disclosure evaluation index system that is suitable for Chinese companies. Through 13 the mediating effect model and Sobel test, the internal mechanism of carbon disclosure quality affecting 14 total factor productivity is analyzed, with Chinese heavy polluting listed corporates from 2015 to 2018 15 as research samples. The empirical results show that, Firstly, the Quality of carbon disclosure has a 16 positive effect on the improvement of total factor productivity. The effect of monetary carbon disclosure 17 quality on the improvement of total factor productivity is higher than that of non-monetary carbon 18 disclosure quality. Secondly, the financing structure has a mediating effect on the quality of carbon 19 disclosure and total factor productivity, and the mediating effect of internal financing capabilities is better 20 than those of external financing costs. Finally, external financing costs and internal financing capabilities 21 have mediating effects in both heterogeneous carbon disclosure quality and total factor productivity. The 22 mediating effect of internal financing capabilities is significantly higher than the mediating effect of 23 external financing costs. Meanwhile, the effect of monetary carbon disclosure quality on total factor 24 productivity indirectly through internal financing capabilities is higher than that of non-monetary carbon 25 disclosure quality. 26


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The research literature generally believes that corporate carbon disclosure is closely related to the 56 financing structure. Companies can use carbon disclosure to transmit information to investors or potential 57 investors to reduce the negative impact caused by information asymmetry and provide them with 58 information on investment decisions. The reduction of information asymmetry by enterprises can play a 4 leakage. The resulting information asymmetry and potential moral hazards make the financing costs of 66 innovation activities higher (Hall, 2002). The characteristics of innovative activities make enterprises 67 inevitably face funding problems. According to the optimal structure theory of new structural economics, 68 only a suitable financing structure can meet the financing needs of different industries and enterprises 69 and promote enterprise innovation (Brown et al, 2012). It is worth noting that previous studies to measure technological progress, it also includes the innovation of many factors such as the knowledge level of 74 material production, management skills, and institutional environment. It is more appropriate to use total 75 factor productivity to measure enterprise innovation. It reflects the nature of productivity as an economic 76 concept, which is the average output level of various input elements in the production process. That is, 77 the overall efficiency of input into the final output (Gatto et al, 2011). So can we find strong empirical 78 evidence to support the mediating effect of corporate financing structure between the quality of carbon 79 disclosure and total factor productivity, to reveal the internal mechanism between the quality of carbon 80 disclosure and total factor productivity?

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The above questions urgently need to be answered theoretically and empirically. Therefore, this paper 82 uses listed companies in China's heavily polluting industries as the sample and innovatively analyzes the 83 relationship among the quality of carbon disclosure, financing structure, and total factor productivity, 84 and empirically tests the influence of carbon information disclosure quality on total factor productivity 85 and the mediating effect of financing structure on the relationship between carbon disclosure quality and 86 total factor productivity, and reveals the mechanism of carbon disclosure quality on total factor 87 productivity. The research contributions of this paper are as follows: First, most of the existing literature 88 pays more attention to the economic benefits of carbon disclosure quality, while ignoring the relationship 89 between carbon disclosure quality and total factor productivity. The research results in this paper prove 90 that there is a positive relationship between Chinese corporate carbon disclosure quality and total factor 91 productivity. Monetary carbon disclosure quality is better than non-monetary carbon disclosure quality 92 in promoting total factor productivity. Second, The empirical results confirm that the financing structure 93 plays an intermediary effect in the impact of carbon disclosure quality on total factor productivity, and 94 reveals the acting path of carbon disclosure quality affecting total factor productivity. The mediating 95 effect of internal financing capabilities is higher than that of external financing costs. Third, based on the 96 perspective of heterogeneous carbon disclosure quality, it is further verified that the mediating effect of 97 internal financing capabilities in the impact of monetary carbon disclosure quality on total factor 98 productivity is better than that of external financing costs in the impact of non-monetary carbon 99 disclosure quality on total factor productivity. The mediating effect in the process helps to deepen the 100 understanding of the internal mechanism of how carbon disclosure quality affects total factor productivity.
6 productivity is rarely seen in the literature. In the real market, information asymmetry will seriously 110 hinder technological innovation. On the one hand, the pre-event asymmetric information of investors 111 will lead to the fact that enterprises can not obtain sufficient financial support for technological 112 innovation, that is, enterprises are forced to give up technological innovation due to financing constraints 113 (Hall and Lerner, 2010). On the other hand, the information asymmetry of investors after the event will 114 lead to the agent's subjective unwillingness to invest in technological innovation, that is, technological 115 innovation cannot be realized smoothly due to agency problems (Holmstrom, 1989). Voluntary 116 information disclosure theory believes that a higher quality of information disclosure is an important 117 mechanism to reduce the degree of information asymmetry inside and outside the enterprise (Healy and 118 Palepu, 2001). On the one hand, higher quality of information disclosure can reduce investors' prior 119 information disadvantages, improve the external financing environment of companies, and ease 120 financing constraints. On the other hand, higher quality of information disclosure can improve the quality 121 of information obtained by investors in hindsight, reduce the risk of infringement of investors' rights and 122 interests, which will reduce the agency problem. (Balakrishnan et al, 2014). It can be seen that a higher 123 quality of information disclosure can reduce the information asymmetry that hinders technological 124 innovation. Therefore, the higher quality of carbon disclosure may have a positive impact on 125 technological innovation.

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Existing research confirms that enterprise total factor productivity is a comprehensive evaluation 127 indicator in production, which can be decomposed into technological innovation effect and resource 128 allocation effect (Ren et al, 2019). Technological innovation has a positive effect on total factor 129 productivity and is a key driving force for total factor productivity growth (Hammar and Belarbi).

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According to the theory of priority financing, internal financing is the first choice for enterprises to 160 improve innovation investment and total factor productivity (Scherer, 2000). In economic transactions 161 and negotiations, different personnel and groups have different levels of information mastery. If they 162 have the higher the level of information integrity, they will be in a dominant position, and it is easier to 163 grasp the initiative of the transaction. The party with an information disadvantage will alleviate the 164 problem of information asymmetry to protect their interests through some restrictions. The party with an 165 information disadvantage will alleviate the problem of information asymmetry through some restrictions, 166 to protect their interests. In the use of retained funds, the enterprise does not need to pay for financing 167 expenses because it does not involve external investors, and the cost is low. At the same time, the approval 168 process is simple and only needs to be approved by the general meeting of shareholders or the board of 169 directors. As a result, the adverse selection problem caused by information asymmetry is greatly reduced, 170 which enables enterprises to concentrate on the investment and operation of innovation projects. The 171 financial manager of the enterprise has a comprehensive grasp of the funds, the management has a 172 detailed plan for the development of the enterprise, and the communication between the two sides is 173 more convenient. It can timely invest in the feasible innovation scheme and do a good job in the use and 174 supervision of the funds. Also, the "investment cash flow sensitivity" effect shows that investment 175 expenditure is consistent with the change of internal cash flow, and the more internal funds of enterprises, and creditors do not understand the degree of risk in innovation. There is a clear asymmetry between the 179 benefits of corporate innovation and the risks to be assumed. Therefore, reasonable contracts are designed 180 to protect rights and interests. Generally, they will indicate restrictions or increase risk premiums when 181 borrowing, which will increase financing costs and inhibit innovation. The adverse selection also exists 182 in debt financing. Enterprises with poor qualifications will hide some unfavorable information when

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At the same time, given that monetary carbon disclosure quality is directly related to corporate 200 earnings, while non-monetary carbon disclosure quality has uncertainty, there may be differences in the 201 mechanism of financing structure between heterogeneous carbon disclosure and total factor productivity.

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The logical analysis framework of this paper is shown in Figure 1. "+" represents a positive 211 relationship. "-" represents a negative relationship.

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The first step is the total effect test. The model 1 is used to analyze the total effect of carbon disclosure 236 quality on total factor productivity. The coefficient  represents the impact of carbon disclosure 237 quality on total factor productivity. If  is positive and statistically significant, it indicates that there 238 is a positive relationship between carbon disclosure quality and total factor productivity.

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The second step is the mediating effect test, by constructing Model 2 and Model 3 to analyze the 240 impact of carbon disclosure quality on the financing structure, which in turn affects the company's total 241 factor productivity. Model 2 measures whether there is a mediating effect in the financing structure, if 242  is significant, it means that there is a mediating effect in the financing structure. Model 3 measures 243 the direct effect of carbon disclosure quality on total factor productivity, if  is not Significant, while 244  is significant, it means that the financing structure has a completely mediating effect in the impact

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of carbon disclosure quality on total factor productivity. If both  and  are significant, it means 246 that the financing structure has a partial mediating effect.
TFP represents the total factor productivity of the listed company i at period t , represents the carbon disclosure quality of the listed company i at period t ,

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This paper follows the mediating effect test procedure proposed by Sobel (1982

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and the specific accounting methods are as follows: MCD respectively represent the corporate carbon disclosure quality, non-318 monetary carbon disclosure quality, and monetary carbon disclosure quality.      Table2 and Table 3.

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To avoid pseudo-regression in subsequent regression analysis, this paper tests the correlation and 356 collinearity between variables in advance. It can be seen from Table 3

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Due to the significant correlation coefficients among some variables, the possible multicollinearity 365 problem between variables was further examined. It can be seen from Table 3 that the variance inflation 366 factor of each variable is lower than 3, so it can be concluded that the model does not have a serious 367 multicollinearity problem. In summary, the selection of variables in this article is reasonable and 368 representative.

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This paper uses the Sgmediation command of Stata14 to test the mediating effect. Table 4 reports the 376 total effect of carbon disclosure quality on total Factor productivity and the mediation effect of financing 377 structure between carbon disclosure quality and total Factor productivity. From the results of Sobel's test,

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it can be seen that the debt financing cost and retained earnings ratio rejected the null hypothesis, and 379 confirmed that the debt financing cost and retained earnings ratio play a mediating effect on the impact 380 of carbon disclosure quality on the total factor productivity. Hypothesis H3 can be confirmed. By

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comparing the mediating effect coefficients, it can be found that the mediating effect coefficient of debt 382 financing costs is 0.033, which is significantly lower than the mediating effect coefficient of the retained 383 earnings ratio of 0.070, which indirectly shows that the quality of corporate carbon disclosure is more 384 conducive to improving internal financing capabilities to increase total factor productivity.

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Equation 1 is the first step to test the mediating effect, which is to test the total effect of the quality 392 of carbon disclosure on total factor productivity. The result of Equation 1 shows that the coefficient of that high-quality carbon disclosure can effectively promote the improvement of total factor productivity.

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To further study the mechanism between the quality of carbon disclosure and total factor productivity,

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we continue to test the mediating effect. In the second step, we get the equation 2 to equation 5. Equation

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indicating that the mediating effect of retained earnings ratio between the quality of non-monetary carbon 422 disclosure and total factor productivity is better than that of debt financing cost. 5 both pass the significance test. The performance for total factor productivity is the positive driving 439 effect indicates that the retained earnings ratio has a mediating effect on the quality of non-monetary carbon disclosure and total factor productivity. Note: ***, **, * represent significant at the significance level of 1%, 5%, and 10% respectively.

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The T statistics are in parentheses.

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Total Factor Productivity 449 Table 6 reports the total effect of monetary carbon disclosure quality on total factor productivity and 450 the mediating effect of financing structure on the relationship between monetary carbon disclosure 451 quality and total factor productivity. The Sobel test cannot accept the null hypothesis, which shows that 452 debt financing cost and retained earnings ratio also have a mediating effect on the impact of monetary 453 carbon disclosure quality on total factor productivity. Hypothesis 5 can be verified. From the mediating 454 effect coefficient, the mediating effect coefficient of retained earnings ratio is always higher than that of 455 debt financing cost.

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In the total effect regression results, the regression coefficient of monetary carbon disclosure quality 457 is 0.366, which has passed the significance test of 1%, and it is significantly higher than that of non-

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Besides, by comparing the mediating effect coefficient of financing structure between heterogeneous 473 carbon disclosure quality and total factor productivity, the effect of monetary carbon disclosure quality 474 on reducing debt financing cost and improving internal retained earnings is higher than that of non-475 monetary carbon information disclosure quality. Hypothesis 6 can be verified.  it is related to carbon information disclosure, but it is unlikely to directly affect the total factor 491 productivity of a single enterprise is modest. It can be seen from

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To test the robustness of the research conclusions, this study uses the GMM method to recalculate 510 the company's total factor productivity, replacing the dependent variable TFP. Table 8, Table 9, and Table   511 10 report the total effect of carbon disclosure quality and heterogeneous carbon disclosure quality on 512 total essential productivity, and test the mediating effect of financing structure on carbon disclosure 513 quality, heterogeneous carbon disclosure quality, and total factor productivity. Note: ***, **, * represent significant at the significance level of 1%, 5%, and 10% respectively.The

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T statistics are in parentheses. and internal financing capabilities as mediating variables, to analyze the mechanism and transmission 542 path of carbon disclosure quality and heterogeneous carbon disclosure quality on total factor productivity.

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The results show that there is a positive relationship between the quality of carbon disclosure and total 544 factor productivity in China's heavy pollution industries, and the financing structure plays a mediating 545 effect on the quality of carbon disclosure and total factor productivity.

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First, the quality of carbon disclosure, non-monetary carbon disclosure, and monetary carbon 547 disclosure all play a positive effect on the improvement of corporate total factor productivity. Among 548 them, the effect of monetary carbon disclosure quality on the improvement of total factor productivity is 549 higher than that of non-monetary carbon disclosure quality. This shows that higher quality of carbon 550 disclosure can reduce the information asymmetry that hinders total factor productivity (Kleimeier and

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Second, the external financing costs are negatively related to total factor productivity, while there is 556 a positive relationship between the internal financing capabilities and total factor productivity. This

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shows that due to the obvious asymmetry between the expected benefits and potential risks of enterprise 558 innovation of external investors, the risk premium is massively increased (Chen et al.,2014), which 559 increases the costs of external financing (Yu and Wang, 2016), and thus inhibits the improvement of total 560 factor productivity. However, internal financing does not involve agency cost, which has the improvement of total factor productivity.

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Third, external financing costs and internal financing capabilities play a mediating effect in carbon 564 disclosure and total factor productivity, and the mediating effect of internal financing capabilities is better 565 than that of external financing costs. It shows that under the effect of high-quality carbon disclosure, the 566 external financing constraints faced by enterprises can be improved (Li and Foo, 2015), and the internal 567 financing capabilities can be improved, which is beneficial to the improvement of enterprises' total factor 568 productivity. Besides, under the effect of agency costs (Bessonova and Gonchar, 2017), the improvement 569 of the internal financing capabilities of enterprises has a significantly higher promotion effect on total 570 factor productivity than the positive effect of the reduction of external financing costs. Therefore, 571 enterprises will give priority to internal financing to improve total factor productivity, which is in line 572 with the Pecking Order Theory (Park, 2019).

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Finally, external financing costs and internal financing capabilities have also a mediating effect on 574 heterogeneous carbon disclosure and total factor productivity. The mediating effect of internal financing 575 capabilities in heterogeneous carbon disclosure and total factor productivity is significantly higher than 576 that of external financing costs. It shows that to obtain more innovation funds, companies need to focus

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It is beneficial to improve the total factor productivity of enterprises. The above research has certain practical value: First, the empirical results show that the effect of 583 monetary carbon disclosure quality on total factor productivity is significantly higher than that of non-584 monetary carbon disclosure. When companies disclose carbon information, they can tend to disclose monetary carbon information disclosure to occupy the market competitive advantage. Second, the 588 empirical results show that the mediating effect of internal financing capabilities is significantly better 589 than the mediating effect of external financing costs. Although high-quality carbon disclosure reduces 590 the negative effects of information asymmetry and agency costs, it is not as effective as increasing the 591 strength of internal financing capabilities in reducing external financing costs. Therefore, Enterprises can 592 adopt the mode of internal financing as the main mode and external financing as the auxiliary mode to 593 carry out carbon disclosure, to better promote the level of enterprise total factor productivity. should adopt Python technology to process enterprise carbon disclosure data, and measure the quality of 604 enterprise carbon disclosure more objectively. Third, some scholars have used the adjustment path