The Impact of Environmental Administrative Penalties on the Disclosure of Environmental Information

Xiangan Ding,Ying Qu,Mohsin Shahzad

doi:10.3390/su11205820

Abstract

Stakeholders often have a significant interest in the disclosure of information by companies that have received environmental penalties. This study examines how environmental administrative penalties influence companies’ environmental disclosures. Using a sample of 316 manufacturing companies across three years in China, the regression results indicate that the level of voluntary environmental information disclosure (EID) is significantly positively affected by environmental penalties. For companies in heavily polluting industries, environmental penalties decrease their involuntary EID. Environmental penalties also reduce the quality of environmental information, which is mainly reflected in the weakening of the integrity, comprehensibility, and relevance of environmental information in corporate social responsibility (CSR) reports or environmental reports. These findings help us to understand the sustainability of corporate environmental responsibility in the context of environmental administrative penalties.

Highlights

Environmental administrative penalties directly affect companies’ revenues by disrupting their production process, but they generate negative externalities
According to the above analysis, because the environmental penalty will promote the impression management of companies, and the impression management will reduce the quality of the environmental information disclosed by the company, we propose the following hypothesis: Hypothesis 3 (H3)
The finding is supportive of hypothesis 1’s prediction that there is a positive correlation between the environmental administrative penalty and the level of voluntary environmental information disclosure (EID)

Summary

Introduction

Environmental administrative penalties directly affect companies’ revenues by disrupting their production process, but they generate negative externalities. Previous research suggests that environmental disclosures in annual reports can be integrated as an environmental strategy or used as a self-serving tool to alleviate the crisis of legitimacy to gain legitimacy from stakeholders [2,3,4]. The researchers argued that if managers want to conceal negative aspects of the company, they will obfuscate negative outcomes by increasing reading difficulty in their annual reports [10,14,15] or providing less complete information, and so on [16]. Under the environmental administrative penalty, how might environmental information disclosure (EID) be affected? Revealing the effect of the environmental administrative penalty on environmental disclosure is the key to understanding the disclosure strategy of penalized companies

Objectives

Methods

Results

Conclusion