【Book Overview】

This book is the publication of the author’s doctoral dissertation in accounting from Renmin University of China. The dissertation primarily explores and compares the relationship between the true value of the corporation and its stock price in China and the US. It discusses the impacts of economic, social, and environmental factors on this true value, focusing on whether the true value is significantly related with the stock prices after internalizing the external environmental costs of carbon emissions.

Using the residual income valuation model (Ohlson, 1995), the book analyzes the relationship between carbon emissions, carbon emission costs, and the true value of companies and their stock prices using a sample of companies that disclose their social contribution value per share on the Shanghai Stock Exchange (SSE). It distinguishes between high- and low- carbon emission industries and the SSE 380 Index constitutes. The book includes a comparative empirical analysis of China and the US, using the constituents of the S&P 500 Index as representative of the latter. As these are the world’s two largest economies and the top two for carbon emissions, the differences in their capital market development, carbon trading activity, ESG report environmental information and carbon emission disclosures, and the maturity of the environmental concept in each jurisdiction make this comparative book highly valuable, both theoretically and practically.

The empirical results of this book show that in both China and the US, in industries with high carbon emissions, there is a significant negative relationship between stock prices and both carbon emissions and costs based on the actual carbon trading prices and the carbon social cost derived from economic theory. Moreover, the corporate values in high and low-carbon industries, calculated by deducting the actual and true cost of carbon emissions from earnings per share, have a significant positive relationship with the stock price and can replace earnings per share as a good substitute for stock price estimation. Accordingly, the corporate value is impacted by external environmental costs of carbon emissions. These conclusions indicate that carbon emissions and cost information have been internalized into stock prices and provide valuable insights and references for management, corporate valuation, investment decision-making, and the development of sustainability reports, especially in high carbon emission industries.