Mitigating Financial Statement Information Deficiency: The Role of Supplementary ESG Information in Improving the Value Relevance of Accounting Earnings

Abstract

Financial statements focus on historical monetary information, which inevitably suffers from information incompleteness, timeliness lag, and insufficient reflection of corporate sustainable development potential, leading to reduced value relevance of traditional accounting earnings. As important non-financial supplementary information, ESG disclosure can effectively compensate for the inherent defects of financial information and transmit incremental corporate characteristic information to capital market investors. Based on the information asymmetry theory and signal transmission theory, this study selects the panel data of Chinese A-share listed companies from 2018 to 2023 as the research sample, adopts the modified Ohlson price model to empirically test the impact of ESG supplementary information disclosure on financial statement information deficiency and accounting earnings value relevance. The results show that ESG supplementary information disclosure significantly improves the value relevance of accounting earnings; further mechanism tests confirm that high-quality ESG disclosure mitigates information asymmetry caused by insufficient financial information, reduces investor information judgment bias, and thus strengthens the correlation between accounting earnings and stock market value. Heterogeneity analysis indicates that the value enhancement effect of ESG information is more significant in non-state-owned enterprises and firms with low financial information transparency. This study verifies the incremental information value of ESG disclosure, provides empirical evidence for improving corporate information disclosure quality, and offers references for investors’ decision-making and capital market information optimization.