Abstract
The literature shows that a firm’s environmental information disclosure is affected by internal and external factors. However, it is unclear whether internal control positively impacts a firm’s green information disclosure. We collected data from the period 2010–2016 from either environmental reports or the environmental section of social responsibility reports of A-share listed companies in the heaviest polluting industries of the Chinese capital market, 1603 companies in total, and established an evaluation index for measuring firm greenness. Our research indicates that the level of internal control was positively correlated to the firm’s greenness level, and deficiencies in internal control were negatively correlated to the firm’s greenness level, indicating that high-quality internal control improves company green information disclosure. Pertaining to property rights, the internal control of state-owned enterprises had a significant effect on improving the level of environmental information disclosure. Among five elements of internal control, the internal environment, information and communication elements had a significant positive impact on firm greenness. Compared with samples with uncorrected major deficiencies in internal control, rectified companies’ environmental information disclosure was greener. These findings provide empirical evidence for a comprehensive understanding of the non-financial reporting goals of firm internal control, and will become a useful reference for firm green governance decision-making.
Highlights
While economic activities have produced a large amount of social wealth, they have seriously damaged the natural environment
Clarkson et al [22] used the Australian National Corporation’s National Pollutant Inventory (NPI) emissions data, and the results showed that companies with a higher tendency to produce heavy pollution disclosed more environmental information
Meng et al [31] studied the relationship between executive turnover and environmental information disclosure based on data from the Chinese capital market, and found that involuntary replacement of executives was significantly negatively correlated to the adequacy of environmental information disclosure, whereas voluntary replacement of executives was not significantly correlated to the adequacy of environmental information disclosure
Summary
While economic activities have produced a large amount of social wealth, they have seriously damaged the natural environment. Firms are required to regularly disclose information on pollution discharges, environmental compliance, and environmental management; and it is an important way for the government, the public, and environmental organizations to understand a firm’s environmental performance. In 2006, the Shenzhen Stock Exchange issued the Guides for Social Responsibility of Listed Companies to encourage listed companies to voluntarily disclose environmental information. In 2008, the Shanghai Stock Exchange issued the Guides for Environmental Information Disclosure of Listed Companies, which clarified the scope of environmental information disclosure and procedural requirements. In 2010, the Ministry of Environmental Protection issued a draft of the Guidelines for Environmental Information Disclosure of Listed Companies, requiring listed companies in polluting industries to regularly disclose environmental information and release annual environmental reports. Promoting a firm’s green information disclosure has become a major issue for governments, markets, and firms
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