ADOPTION OF PRODUCT MARKET COMPETITION ON THE RELATIONSHIP BETWEEN ENVIRONMENTAL ACCOUNTING INFORMATION DISCLOSURE AND FINANCING CONSTRAINTS

Authors

DOI:

https://doi.org/10.20397/2177-6652/2025.v25i1.3112

Keywords:

Environmental Accounting Information Disclosure; Financing Constraints; Product Market Competition; Environmental Responsibility

Abstract

In the context of growing global environmental concerns, investors and financial institutions are emphasizing environmental responsibility and sustainability. Financing constraints represent barriers that companies may encounter when seeking funding, which can have a significant impact on their investment decisions and expansion plans. Through enhanced environmental accounting information disclosure (EAID), companies can communicate their financial constraints to the outside world while still showing their commitment to being environmentally responsible. This approach not only enhances their corporate image, but may also help alleviate financing constraints and promote their sustainable development. Product market competition, as an external governance discipline mechanism, has the potential to drive innovation and productivity within companies. However, there is a complex relationship between product market competition and financing constraints. The enhancement of product market competitiveness can enhance investor confidence, reduce investors' requirements for risk premium, and thus reduce external financing costs. This study examined the influence of EAID on financing constraints through the lens of information asymmetry theory and resource dependence theory, while also investigating the heterogeneity of product market competition in the relationship between EAID and financing constraints, considering the nature of property rights. It was found that EAID can significantly alleviate financing constraints, that product market competition is negatively related to financing constraints, and that product market competition weakens the mitigating effect of EAID on financing constraints. These findings provide valuable insights for policymakers, investors, and managers seeking to balance environmental responsibility while fostering financial development under competitive market pressures.

Author Biographies

Bikun Xu, Universiti Teknologi Malaysia (UTM), Skudai Johor, 81310, Malaysia

Faculty of Management, Universiti Teknologi Malaysia (UTM), Skudai Johor, 81310, Malaysia

Noriza Mohd Jamal , Faculty of Management, Universiti Teknologi Malaysia (UTM), Skudai Johor, 81310, Malaysia

Faculty of Management, Universiti Teknologi Malaysia (UTM), Skudai Johor, 81310, Malaysia

Tingting Xie , School of Management, Universiti Sains Malaysia (USM), 11800, Penang, Malaysia and Department of Accounting, Guangxi Technology and Business Vocational College, China

School of Management, Universiti Sains Malaysia (USM), 11800, Penang, Malaysia and Department of Accounting, Guangxi Technology and Business Vocational College, China;

2689656635@qq.com

ORCID: 0009-0002-9344-4788

Xiaoxin Li, Department of Accounting, Zhengzhou College of Finance and Economics, Zhengzhou, China

Department of Accounting, Zhengzhou College of Finance and Economics, Zhengzhou, China; 921814276@qq.com

ORCID: 0009-0000-5219-6947

References

Akbar, A., Jiang, X., Qureshi, M. A., & Akbar, M. (2021). Does corporate environmental investment impede financial performance of Chinese enterprises? The moderating role of financial constraints. Environmental Science and Pollution Research, 28(41), 58007–58017. https://doi.org/10.1007/s11356-021-14736-2

Arora, A., & Sharma, D. (2022). Do Environmental, Social and Governance (ESG) Performance Scores Reduce the Cost of Debt? Evidence from Indian firms. Australasian Business, Accounting and Finance Journal, 16(5), 4–18. https://doi.org/10.14453/aabfj.v16i5.02

Arouri, M., El Ghoul, S., & Gomes, M. (2021). Greenwashing and product market competition. Finance Research Letters, 42, 101927. https://doi.org/10.1016/j.frl.2021.101927

Babar, Md., & Habib, A. (2021). Product market competition in accounting, finance, and corporate governance: A review of the literature. International Review of Financial Analysis, 73, 101607. https://doi.org/10.1016/j.irfa.2020.101607

Bai, X., & Lyu, C. (2023). Executive’s Environmental Protection Background and Corporate Green Innovation: Evidence from China. Sustainability, 15(5), 4154. https://doi.org/10.3390/su15054154

Bernini, M., & Montagnoli, A. (2017). Competition and financial constraints: A two-sided story. Journal of International Money and Finance, 70, 88–109. https://doi.org/10.1016/j.jimonfin.2016.07.003

Boubaker, S., Saffar, W., & Sassi, S. (2018). Product market competition and debt choice. Journal of Corporate Finance, 49, 204–224. https://doi.org/10.1016/j.jcorpfin.2018.01.007

Chaturvedi, A., & Singh, A. (2024). Product market competition, debt rollover risk and financial default risk: Evidence from Indian corporates. Managerial Finance, 50(10), 1837–1856. https://doi.org/10.1108/MF-11-2023-0726

Chen, L., Khurram, M. U., Gao, Y., Abedin, M. Z., & Lucey, B. (2023). ESG disclosure and technological innovation capabilities of the Chinese listed companies. Research in International Business and Finance, 65, 101974. https://doi.org/10.1016/j.ribaf.2023.101974

Chen, Y., Wang, G., He, Y., & Zhang, H. (2022). Greenwashing behaviors in construction projects: There is an elephant in the room! Environmental Science and Pollution Research, 29(43), 64597–64621. https://doi.org/10.1007/s11356-022-20119-y

Emmanuel, O. G., Elvis, E., & Abiola, T. (2019). Environmental Accounting Disclosure and Firm Value of Industrial Goods Companies in Nigeria. Journal of Economics and Finance, 10, 07–27. https://doi.org/10.9790/5933-1001030727

Fard, A., Javadi, S., & Kim, I. (2020). Environmental regulation and the cost of bank loans: International evidence. Journal of Financial Stability, 51, 100797. https://doi.org/10.1016/j.jfs.2020.100797

Guluma, T. F. (2021). The impact of corporate governance measures on firm performance: The influences of managerial overconfidence. Future Business Journal, 7(1), 50. https://doi.org/10.1186/s43093-021-00093-6

Hadlock, C. J., & Pierce, J. R. (2010). New Evidence on Measuring Financial Constraints: Moving Beyond the KZ Index. Review of Financial Studies, 23(5), 1909–1940. https://doi.org/10.1093/rfs/hhq009

Hassan, O. A. G. (2018). The impact of voluntary environmental disclosure on firm value: Does organizational visibility play a mediation role? Business Strategy and the Environment, 27(8), 1569–1582. https://doi.org/10.1002/bse.2217

Javeed, S. A., Latief, R., & Lefen, L. (2020). An analysis of relationship between environmental regulations and firm performance with moderating effects of product market competition: Empirical evidence from Pakistan. Journal of Cleaner Production, 254, 120197. https://doi.org/10.1016/j.jclepro.2020.120197

Kaplan, S. N., & Zingales, L. (1997). Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints? The Quarterly Journal of Economics, 112(1), 169–215. https://doi.org/10.1162/003355397555163

Krishnamurti, C., & Velayutham, E. (2018). The influence of board committee structures on voluntary disclosure of greenhouse gas emissions: Australian evidence. Pacific-Basin Finance Journal, 50, 65–81. https:

Li, Y., Zhang, X., Yao, T., Sake, A., Liu, X., & Peng, N. (2021). The developing trends and driving factors of environmental information disclosure in China. Journal of Environmental Management, 288, 112386. https://doi.org/10.1016/j.jenvman.2021.112386

Liang, X., & Chen, X. C. (2023). Mandatory corporate social responsibility disclosure and financial constraints: Evidence from China. International Review of Economics & Finance, 89, 954–974. https://doi.org/10.1016/j.iref.2023.08.011

Lin, Y., Huang, R., & Yao, X. (2021). Air pollution and environmental information disclosure: An empirical study based on heavy polluting industries. Journal of Cleaner Production, 278, 124313. https://doi.org/10.1016/j.jclepro.2020.124313

Liu, G., & Guo, L. (2023). How does mandatory environmental regulation affect corporate environmental information disclosure quality. Finance Research Letters, 54, 103702. https://doi.org/10.1016/j.frl.2023.103702

Liu, P. J., Song, C., & Xin, J. (2022). Does green governance affect financing constraints? Evidence from China’s heavily polluting enterprises. China Journal of Accounting Research, 15(4), 100267. https://doi.org/10.1016/j.cjar.2022.100267

Liu, Z., & Bai, Y. (2022). The impact of ownership structure and environmental supervision on the environmental accounting information disclosure quality of high-polluting enterprises in China. Environmental Science and Pollution Research, 29(15), 21348–21364. https://doi.org/10.1007/s11356-021-17357-x

Luo, X., Zhang, R., & Wang, J. (2022). Product market competition and carbon disclosure: Evidence from China. Carbon Management, 13(1), 379–400. https://doi.org/10.1080/17583004.2022.2100830

Maaloul, A., Zéghal, D., Ben Amar, W., & Mansour, S. (2023). The Effect of Environmental, Social, and Governance (ESG) Performance and Disclosure on Cost of Debt: The Mediating Effect of Corporate Reputation. Corporate Reputation Review, 26(1), 1–18. https://doi.org/10.1057/s41299-021-00130-8

Meng, X., Chen, L., & Gou, D. (2022). The impact of corporate environmental disclosure quality on financing constraints: The moderating role of internal control. Environmental Science and Pollution Research, 30(12), 33455–33474. https://doi.org/10.1007/s11356-022-24510-7

Mertzanis, C., Marashdeh, H., & Ashraf, S. (2024). Female corporate leadership, institutions and financing constraints around the world. International Journal of Managerial Finance, 20(1), 40–70. https://doi.org/10.1108/IJMF-07-2022-0340

Nguyen, T. H. H., Elmagrhi, M. H., Ntim, C. G., & Wu, Y. (2021). Environmental performance, sustainability, governance and financial performance: Evidence from heavily polluting industries in China. Business Strategy and the Environment, 30(5), 2313–2331. https://doi.org/10.1002/bse.2748

Pan, L. H. (2020). The effects of corporate governance and product market competition on payout policy under agency problems and external financing constraints.

Parsa, S., Dai, N., Belal, A., Li, T., & Tang, G. (2021). Corporate social responsibility reporting in China: Political, social and corporate influences. Accounting and Business Research, 51(1), 36–64. https://doi.org/10.1080/00014788.2020.1780110

Povel, P., & Raith, M. (2004). Financial constraints and product market competition: Ex ante vs. ex post incentives. International Journal of Industrial Organization, 22(7), 917–949. https://doi.org/10.1016/j.ijindorg.2004.04.003

Qi, Y., Yao, J., & Liu, L. (2021). Research on evolutionary game of environmental accounting information disclosure from the perspective of multi-agent. PLOS ONE, 16(8), e0256046. https://doi.org/10.1371/journal.pone.0256046

Qian, W., Zhu, P., & Tilt, C. (2022). Corporate environmental disclosure and local government environmental oversight in China. Pacific Accounting Review, 34(2), 358–382. https://doi.org/10.1108/PAR-05-2020-0061

Sandberg, H., Alnoor, A., & Tiberius, V. (2023). Environmental, social, and governance ratings and financial performance: Evidence from the European food industry. Business Strategy and the Environment, 32(4), 2471–2489. https://doi.org/10.1002/bse.3259

Shang, Y., & Chi, Y. (2023). Corporate Environmental Information Disclosure and Earnings Management in China: Ethical Behaviour or Opportunism Motivation? Sustainability, 15(11), 8896. https://doi.org/10.3390/su15118896

Sun, Y., Yang, J., Bao, Q., Tu, H., & Li, H. (2022). Unveiling the nexus between corporate social responsibility, industrial integration, economic growth and financial constraints under the node of firms sustainable performance. Economic Research-Ekonomska Istraživanja, 35(1), 3788–3813. https://doi.org/10.1080/1331677X.2021.2004189

Tan, K., Siddik, A. B., Sobhani, F. A., Hamayun, M., & Masukujjaman, M. (2022). Do Environmental Strategy and Awareness Improve Firms’ Environmental and Financial Performance? The Role of Competitive Advantage. Sustainability, 14(17), 10600. https://doi.org/10.3390/su141710600

Tan, Y., & Zhu, Z. (2022). The effect of ESG rating events on corporate green innovation in China: The mediating role of financial constraints and managers’ environmental awareness. Technology in Society, 68, 101906. https://doi.org/10.1016/j.techsoc.2022.101906

Wei, Z. (2014). Financial Ecological Environment and Corporate Financial Constraints——Evidence from Chinese Listed Firms. Accounting Research, 5, 73-80+95. https://doi.org/CNKI:SUN:KJYJ.0.2014-05-009

Whited, T. M., & Wu, G. (2006). Financial Constraints Risk. Review of Financial Studies, 19(2), 531–559. https://doi.org/10.1093/rfs/hhj012

Wu, J., Ding, Y., Zhang, F., & Li, D. (2021). How to improve environmental performance of heavily polluting companies in China? A cross-level configurational approach. Journal of Cleaner Production, 311, 127450. https://doi.org/10.1016/j.jclepro.2021.127450

Xu, B., & Noriza, M. J. (2024). Environmental Accounting Information Disclosure and Financing Constraints: A Systematic Literature Review. INTERNATIONAL JOURNAL OF ACADEMIC RESEARCH IN BUSINESS AND SOCIAL SCIENCES, 14(12), 1454–1464. https://doi.org/10.6007/IJARBSS/v14-i12/24102

Yang, Y., Wen, J., & Li, Y. (2024). The impact of environmental information disclosure on the cost of debt: Evidence from China. Journal of Applied Economics, 27(1), 2301280. https://doi.org/10.1080/15140326.2023.2301280

Yao, S., Hong, Y., & Lin, C. (2019). Environmental Information Disclosure and Financial Constraint. Asia-Pacific Journal of Financial Studies, 48(5), 666–689. https://doi.org/10.1111/ajfs.12277

Zhai, Y., Cai, Z., Lin, H., Yuan, M., Mao, Y., & Yu, M. (2022). Does better environmental, social, and governance induce better corporate green innovation: The mediating role of financing constraints. Corporate Social Responsibility and Environmental Management, 29(5), 1513–1526. https://doi.org/10.1002/csr.2288

Zhang, X., & Zhou, H. (2022). The effect of market competition on corporate cash holdings: An analysis of corporate innovation and financial constraint. International Review of Financial Analysis, 82, 102163. https://doi.org/10.1016/j.irfa.2022.102163

Zhou, Y., Shi, Z., Lei, F., Sun, W., & Zhang, J. (2022). Effect of Environmental Information Disclosure on the Financing Efficiency of Enterprises—Evidence from China’s Listed Energy Companies. Sustainability, 14(24), 16699. https://doi.org/10.3390/su142416699

Downloads

Published

2025-03-08

How to Cite

Xu, B., Mohd Jamal , N., Xie , T., & Li, X. (2025). ADOPTION OF PRODUCT MARKET COMPETITION ON THE RELATIONSHIP BETWEEN ENVIRONMENTAL ACCOUNTING INFORMATION DISCLOSURE AND FINANCING CONSTRAINTS. Revista Gestão & Tecnologia, 25(1), 115–147. https://doi.org/10.20397/2177-6652/2025.v25i1.3112

Issue

Vol. 25 No. 1 (2025)

Section

ARTIGO

License

Copyright (c) 2025 Revista Gestão & Tecnologia

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

Authors who publish with this journal agree to the following terms: • 1. The author(s) authorize the publication of the article in the journal. • 2. The author(s) ensure that the contribution is original and unpublished and is not being evaluated in other journal(s). • 3. The journal is not responsible for the opinions, ideas and concepts expressed in the texts because they are the sole responsibility of the author(s). • 4. The publishers reserve the right to make adjustments and textual adaptation to the norms of APA. • 5. Authors retain copyright and grant the journal right of first publication, with the work [SPECIFY PERIOD OF TIME] after publication simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal. • 6. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal. • 7. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access) at http://opcit.eprints.org/oacitation-biblio.html