Corporate environmental performance, environmental information disclosure, and financial performance: Evidence from China

Abstract

ABSTRACTAs pollution emitters and energy users, firms are important causes of environmental problems, making it increasingly vital for them to strengthen their environmental management and information disclosure policies. However, firms doubt whether it pays to be green and whether it is worthwhile to disclose their environmental information, and there are hot debates on these questions in the literature. This paper analyzes the relationships among corporate environmental performance, environmental information disclosure, and financial performance in China, which witnessed rapid growth at the price of environmental degradation. With 950 observations from 475 Chinese listed companies between 2013 and 2014, we find a U-shaped nonlinear relationship between corporate environmental performance and environmental disclosure, an insignificant relationship between environmental performance and financial performance, and a negative relationship between environmental disclosure and financial performance, which is different from most findings in developed countries. The aforementioned results imply that Chinese firms have few motivations to disclose environmental information or improve environmental performance; therefore, mandatory disclosure of environmental information is necessary, and proper environmental policy should be made to punish environmental violations and encourage better environmental performance.