The impact of carbon emission trading scheme policy on information asymmetry in the stock market: Evidence from China

The Carbon Emissions Trading Scheme (CETS), as a vital market-oriented emission reduction instrument, has the potential to influence corporate operations and investor decisions. Although the pilot CETS policy in China has been extensively investigated, its impact on information asymmetry in the stock market remains unclear. This paper aims to explore the information transmission effects of the CETS policy from multiple perspectives. Based on data from A-share listed companies, this study utilizes a difference-in-differences (DiD) approach to reveal that China's CETS policy significantly mitigates information asymmetry among the listed companies in the pilot regions. This conclusion persists even after performing various robustness tests. Mechanism analysis indicates that: (1) the CETS policy can enhance the credibility of corporate carbon information disclosure; (2) the trading signals in the carbon market serve as an important channel for the CETS policy to alleviate information asymmetry; and (3) active government participation is crucial for the effective functioning of the CETS policy. Furthermore, our findings show that the impact of the CETS policy exhibits heterogeneity at the corporate and city levels. This study provides empirical evidence at the micro level for the construction of a nationwide CETS and the improvement of the informational environment in financial markets.