Does central environmental protection inspection enhance firms’ environmental disclosure? Evidence from China

Abstract

AbstractAn increasing number of emerging countries have begun implementing central environmental protection inspection (CEPI) to make up for the lack of environmental decentralization. Extant literature has shown that CEPI improves local environmental enforcement and performance. However, it is unclear whether CEPI, which is regarded as a non‐routine environmental enforcement and independent of the system of environmental decentralization, has an increasing effect on firms’ environmental disclosure. This paper selects the listed firms located in Hebei Province, the pilot province inspected by the CEPI, as the treatment group and uses the listed firms of the third and fourth rounds of inspected provinces as the control group. The difference‐in‐difference results show that the environmental information level and quality of listed firms in Hebei Province is improved compared with those of firms in other provinces, and the increasing effect is more significant in state‐owned firms, in developed regions and in regions where local officials have more promotion incentives. The results of this study suggest that the central government should establish a regular environmental inspection mechanism and coordinate it with the system of environmental decentralization in emerging countries.