Research on the Relationship between Management Capability and Corporate Environmental Information Disclosure: Based on the Perspective of Moderating Effects of Power Distance and Marketization Process

Abstract

The construction of ecological civilization is a major strategy in China. Under the background of national strategy, how to deal with the deteriorating ecological environment has become a problem that the whole society needs to solve urgently. As an economic entity that consumes natural resources and discharges pollutants, enterprises should be the backbone of assuming social responsibility and fulfilling environmental protection obligations. Therefore, corporate environmental information disclosure has become a topical issue in theoretical research. Previous studies have shown that managers' personal characteristics and external institutional pressures are important factors that affect the level of corporate environmental information disclosure, but the lack of inspection of management capability that reflected in the overall quality of managers will have an impact on corporate environmental information disclosure. In order to deeply discuss the relevance of management capability and corporate environmental information disclosure quality, the paper is based on the upper echelon theory, reputation theory and legitimacy theory, collected environmental data from the social responsibility report of 340 listed companies in heavy pollution industry in Shanghai and Shenzhen stock markets from 2011 to 2016. By establishing environmental information disclosure index to measure the company's environmental information disclosure quality and DEA-Tobit model to measure management capability to conduct empirical research, the result shows that the management capability is positively correlated with the quality of corporate environmental information disclosure. Then by distinguishing between state-owned enterprises and private enterprises, it finds that the management capability of state-owned enterprises can play a greater role to reveal better environmental information. Furthermore, the paper takes the informal system as breakthrough point, brings forward power distance that based on the Chinese traditional cultural context as a moderator variable, and focuses on the core dual-body structure between chairman of the board and general manager. The research result shows that the power distance would play a regulatory role in the correlation between management capability and the quality of corporate environmental information disclosure. When the power distance between chairman of the board and general manager is higher, it significantly inhibits management capability to improve the quality of corporate environmental information disclosure. It reveals that China's peculiar unity of command phenomenon makes the top leader’s power too concentrated, which is detrimental to the sustainable development of the company. At the same time, the degree of marketization in various regions in China is not balanced. It is valuable to explore the marketization process's role in regulating the relationship between management capability and corporate environmental information disclosure. The research result shows that under the situation of rapid marketization, the positive effect of management capability on the quality of corporate environmental information disclosure is more obvious. Through the study of the correlation between internal and external factors on management capability and environmental information disclosure, the paper puts forward relevant countermeasures from three aspects of the company, the government, and the market, in order to encourage and restrain companies to voluntarily perform environmental responsibility, regulate the environmental information disclosure behavior, improve the quality of environmental information disclosure, and jointly build a green and low-carbon society.