Can Third-Party Environmental Information Disclosure Promote Firm’s Environmental Innovation?

Abstract

The Pollution Information Transparency Index (PITI) was developed jointly in 2008 by the Institute of Public and Environmental Affairs (IPE) and the Natural Resources Defense Council (NRDC). Using PITI as a quasi-natural experiment and a sample of China's listed industrial firms from 2005 to 2011, this study explores the impact of third-party environmental information disclosure on firm’s environmental innovation. The results show that the PITI has a positive effect on firms’ environmental innovation and that the positive impact of third-party environmental information disclosure is higher for state-owned than non-state-owned enterprises’ environmental innovation. Slack resources can strengthen the positive relationship between the PITI and firm environmental innovation. However, the moderating effect of industrial pollution levels on this positive relationship is not significant. We find also that cities with higher quality third-party environmental information disclosure have higher levels of environmental innovation. The findings provide implications for policy related to public participation in environmental protection and firms’ sustainable development.