The Effects of Environmental Information Disclosure on Investors' Perceptions of Earnings Quality: The Difference in Managerial Ownership Structure

Because of the rising awareness of environmental protection, enterprises' disclosure of environmental accounting information become increasingly important. Whether enterprises disclose environmental information seriously and properly depends on the quality of their governance system. This study investigates whether environmental information disclosure affects investors' perceptions of earnings quality using a sample of companies listed on Taiwan Stock Exchange or Taipei Exchange for the period 2012-2019. This study documents that investors' perceptions of higher earnings quality are obvious when firms disclose a higher level of environmental information. Moreover, the positive relationship between environmental information disclosure and investors' perceptions of earnings quality is more pronounced in firms with a higher level of managerial ownership. Overall, these results suggest that environmental information disclosure matters to market participants and that a convergence of interests occurs in the Taiwan capital market.