Corporate Environmental Information Research Articles

Incentives for Corporate Environmental Information Disclosure in China: Public Media Pressure, Local Government Supervision and Interactive Effects

Disclosing environmental information is essential for listed firms to demonstrate social conscience. To fulfill government and public media supervision, Chinese listed firms are increasing the quality and quantity of disclosed environmental information. This elicits a new topic of interest: the correlation between media/government supervision and corporate environmental information disclosure (EID). The paper addresses this issue through data analysis and factor correlation study in data from some high-pollution firms in China during 2017–2019. The study first introduces a standardized definition for the quantification of media and government supervision, as well as the degree to which the corporation discloses the environmental information. Then, the correlations between the factors are isolated and refined to three sub-topics: (1) how public media and local government supervision affect the quality of corporate EID; (2) how is the interactive effect of public media and government supervision related to corporate EID; (3) how is the distinct ownership of corporate affect the government supervision on corporate EID. The concluding result from the above factor analysis could provide guidance for authorities to adjust certain laws and regulations so that the media and government supervision better motivates the corporate EID, and furthermore, better sustainable development of ecological environment.

Does family business affect the relationship between corporate social responsibility and brand value? A study in different industry Taiwan

This study takes the three dimensions of CSR, namely, economic (G), social (S), and environmental(E) dimensions, and the three indicators of corporate governance performance, stakeholders and environmental information disclosure, to explore the relationship between family business of CSR and brand value and determine whether the CSR performance of companies in electronic and non-electronic industries has significantly positive effect on brand value. According to the empirical results, regardless of industry, a better CSR performance by a family business has stronger effect on brand value than that of non-family business. Regardless of industry, a better CSR in both electronics and non-electronics companies exerts a significantly positive effect on brand value. A strong tie between family business in an non-electronic industry and the stakeholder contributes to a higher brand value of an enterprise; a higher degree of environmental information disclosure of an electronics family business exerts greater influence on brand value than does a non-electronics family business.

Stakeholders’ environmental preferences based corporate environmental information influencing factors research

AbstractAttracted widespread attention from stakeholders, environmental information disclosed by companies can show the situations that corporates fulfill their environmental obligations. Different corporate stakeholders usually pay diverse attention to key environmental information factors due to their various industries, investment levels, identity characteristics, etc. However, the previous researches are not scientific enough due to the lack of reflecting the importance of environmental information according to the preferences of stakeholders. To fill this gap, this paper applies a fuzzy analysis model as the internal type‐2 trapezoidal fuzzy numbers —analytic hierarchy process (AHP) based ordinary least square regression to comprehensively reflect the preferences of stakeholders. Following that, this paper utilizes the data from 62 Chinese power companies as an example, and the results show that environmental information disclosed (EID) quality is positively correlated with regional economic development level and executive salary incentives. Moreover, the corporate political connection weakens the interaction between salary incentives and EID, which can be further confirmed by robustness analysis. Finally, this paper contributes to the literature on the research methods on EID by considering stakeholders’ preferences in the fuzzy environment.

Corporate Derivatives Usage, Information Environment, and Stock Price Crash Risk

This study investigates the effect of corporate derivatives usage on stock price crash risk. We test two competing hypotheses. Under the transparency hypothesis, derivatives usage reduces information opacity and lowers crash risk. Under the speculation hypothesis, derivatives usage exacerbates managerial short-termism and increases crash risk. We find evidence supporting the transparency hypothesis. This result is robust to sensitivity checks including a two-stage treatment model, difference-in-differences test, and subsample analysis. We further show that curbing bad news hoarding, curtailing overinvestment, and increasing breadth of ownership are potential channels through which derivatives usage mitigates crash risk. Additional tests on the effect of derivatives usage on likelihood of securities class-action litigation provide consistent results.

Corporate Responsibility Disclosure, Information Environment and Analysts’ Recommendations: Evidence from Malaysia

The purpose of this study was to extend our understanding of how corporate social responsibility (CSR) disclosures impact capital market participants, specifically sell-side analysts. The sample of this study was based on a dataset from a panel of 285 Malaysian firms for the period of 2008–2013 (738 firm-year observations). This study employed ordinary least square regression. This study found that firms with better CSR disclosures are more likely to receive optimistic investment recommendations. Subsample analyses revealed that the CSR-recommendation nexus is more pronounced under a transparent information environment (i) when there is less family control and (ii) when a firm is audited by a prominent Big Four auditor. The results implied that analysts tend to give favorable stock recommendations to high CSR companies operating in a more transparent information environment. To gain analysts’ confidence and make them more appreciative of the CSR disclosures, family firms with proactive CSR engagement are encouraged to switch to Big Four auditors or to seek assurance on their CSR reports. This study broadens our understanding of the factors influencing analysts’ recommendations and the preferences of analysts towards CSR engagement in an emerging market. This paper expands the literature on how corporate responsibility disclosures impact analysts’ final output, as reflected in the recommendation opinion, an area that has so far received little attention, particularly in emerging markets. Furthermore, this study also provides fresh evidence that analyst behavior towards CSR disclosures varies based on the strength of the firm’s information environment.

Corporate Environmental Information Disclosure and Stock Price Crash Risk: Evidence from Chinese listed heavily polluting companies

Environmental performances have gained great prominence for firms in recent years. This paper examines the impact of corporate environmental information disclosure on the stock price crash risk based on a large sample of Chinese heavily polluting companies over the 2013-2019 period. We find that corporate environmental information disclosure reduces the stock price crash risk. The result holds after addressing potential concerns for endogeneity. Moreover, we analyze the mediating mechanisms and identify that operational transparency and investors' reactions work as mediators while information authenticity works as a suppressor. We also find that Internet attention strengthens the negative relation between environmental information disclosure and stock price crash risk. Our results demonstrate that corporate environmental disclosure plays a vital role in long-term sustainable development for heavily polluting companies.

Political connection, political promotion and corporate environmental information disclosure in China

PurposeThis study aims to examine how the political career concerns of top executives affect corporate environmental practices.Design/methodology/approachBased on rent-seeking theory, this work uses empirical analysis to investigate the impact of top executives’ political connection and political promotion on corporate environmental information disclosure (EID). Data were collected from Chinese listed firms in heavily polluting industries in the Shanghai Stock Market in 2014–2016.FindingsThe results reveal that the highly politically connected top executives are more likely to be promoted in their political positions than their counterparts. However, the firms under the management of these highly politically connected executives show low level of EID. The results suggest that the political motivations of top executives with political connection hinders corporate EID.Originality/valueThis paper extends literature system about the impact of executives' rent-seeking on corporate EID by examining the informal mechanisms in terms of political connection and political promotion. It provides insights for studies of corporate environmental strategies and governmental environmental responsibility.

Effect of air quality on corporate environmental disclosure: The moderating role of institutional investors

As air quality has deteriorated, corporate environmental information disclosure (EID) has received extensive attention. We examine how air quality and institutional investors affect corporate EID under China's New Environmental Protection Law (NEPL). We show that air quality's effect on EID depends on institutional investors' supervision and the legal environment. We demonstrate a negative relationship between air quality and EID and a positive relationship between corporate EID and firm value, based on which we explore the driving force to promote corporate EID. The difference-in-differences method indicates that firms in more polluted areas have a higher EID after NEPL implementation than those in less polluted areas. Additionally, the moderation effect model shows that after NEPL implementation, institutional investors can alleviate the negative relationship between air quality and corporate EID, emphasizing the importance of legislation. Our study contributes to ongoing research on methods promoting EID initiatives as air quality deterioration continues.

Trend and relationship between environmental accounting disclosure and environmental performance for mining companies listed in China.

We examined the effect of environmental disclosure on environmental performance for listed mining companies in China. Our analysis used China’s Environmental Information Disclosure Degree (EIDD) and the Chinese Securities Regulatory Commission’s disclosure guidelines to propose the Environmental Information Disclosure Index. Majority of previous studies on environmental disclosures focused on a particular company or city or province. Few studies considered a whole sector of a country. Among the few studies that considered a whole industry, none of such studies considered the mining industry. In addition, our study employed a recent environmental disclosure index and modified a recent index for environmental performance for the empirical analysis making our study unique. We also employed vigorous reliability and robustness test to ensure that our findings are valid and can be used by policy-makers. Using panel data for thirty-four mining companies from both Shanghai and Shenzhen Stock Exchange for the period 2000–2018, our cointegration estimation analysis concluded that corporate environmental performance and environmental information disclosure has a positive and significant relationship at a 1% level. Trend analysis revealed that mining companies comply with environmental information disclosure in China. This was seen from the great improvement in the environmental disclosure for mining companies between 2008 and 2010 after the enforcement of EIDD. Our results contribute to the previous literature and open the way for further studies on industry level in other countries.

The Pay Dispersion within Top Managers and Corporate Environmental Responsibility Information Disclosure

Because of the large scale of listed companies, they are often the main responsible parties for environmental problems. Therefore, from the perspective of compensation incentive, this study made an empirical test on how the pay dispersion within top managers affects corporate environmental responsibility information disclosure. By selecting A-share companies listed in Shanghai or Shenzhen Stock Exchange which published corporate social responsibility reports from 2008 to 2018 as research samples, a multivariate regression analysis model was established. The results showed that there is a significant inverted U-shaped relationship between executive compensation gap and corporate environmental responsibility information disclosure. Further research found that this relationship was only significant in state-owned enterprises.

Moral Hazard and the Corporate Information Environment

Much of corporate managers’ incentive is related to the stock price. Consequently, a firm can design its corporate information environment to tackle its manager’s moral hazard problem. We analyze a model in which the manager needs to exert costly effort to implement a risky, long-term project and the project gives the manager opportunities to make credible disclosure. The optimal disclosure to motivate effort is the manager’s strategic disclosure because it protects the manager from the downside of the project and induces the rational stock market to punish nondisclosure. A more transparent information regime is not always preferred because it may reduce the manager’s discretion on disclosure. We also derive the optimal disclosure when both the effort and the project choice are considered.

Does Stock Liquidity Shape Voluntary Disclosure? Evidence from the SEC Tick Size Pilot Program

Employing the SEC Tick Size Pilot Program that increases the minimum trading unit of a set of randomly selected small-capitalization stocks, we examine whether and how an exogenous change in stock liquidity affects corporate voluntary disclosure. Using difference-in-differences analyses with firm fixed effects, we find that treatment firms respond to the liquidity decline by issuing fewer management earnings forecasts, while in contrast, control firms do not exhibit a significant change. Next, we show that the effect is more pronounced when firms experience more severe liquidity decreases during the TSPP and rule out a set of alternative explanations. Further strengthening the identification, we find a consistent reversal effect after the end of the pilot program. To generalize our findings, we use voluntary 8-K filings and conference calls as alternative voluntary disclosure proxies and find similar effects. Overall, these findings show how an exogenous change in stock liquidity shapes the corporate information environment.

Model of Sustainable Tax Development Practices under Information Environment by Total Interpretive/Structural Model (TISM)

The dynamics of corporate information environments are seen as a basis for managerial decision-making such as sustainable tax development, which can reduce agency costs and promote market-level information symmetry across regulatory bodies. The purpose of this research is presenting a Model of Sustainable Tax Development Functions under the Information Environment of Tehran Stock Exchange Companies. In this research-based on qualitative and quantitative methodology, Initially, 13 tax professionals who were also active at the university level, Participated in the Meta-synthesis and the Delphi section to validate the research components and indicators among the 11 approved studies, Delphi analysis used to identify the theoretical adequacy of the component and the set of indices. In the quantitative section, 28 CEO of the stock exchange companies who were selected through an available sampling method selected randomly and used matrix questionnaires to stratify the identified indices in a range of the most influential indices. To the least effective indicators. The results in qualitative Analysis indicate the existence of three main components in the form of the final indicators based on theoretical adequacy and in the quantitative section, it was found that the indicators, greater dynamics of the value of the company based on tax transparency (C1) as an indicator of external information environment functions and increased The level of disclosure of economic performance in line with the GRI standard (C9) and the strategic balance between tax minimization and corporate value (C10) as an indicator of the component of internal information environment functions most strongly as a consequence of sustainable tax development under corporate information environment conditions for stock companies. Tehran Stock Exchange. These results show that the development of sustainable tax functions under corporate information environment conditions can also help to improve the effectiveness of corporate internal operations, regardless of the positive effects on the competitive and market levels.

Do Financial Analysts Play a Complementary or Substitutive Role in the Corporate Information Environment? Evidence from Organised Labour

This paper explores the primary role of financial analysts in the context of unionised firms, where investors have greater information demand. Previous literature suggests that labour unions create substantial uncertainty in firms and undermine the information environment, while another strand of literature argues that analysts devote more effort to generating valuable information through original research in the case of heightened uncertainty or information asymmetry. To date, it is unclear whether financial analysts, as professional information intermediaries, are affected by organised labour. Using a large U.S. sample over the period of 1983-2015, we find that the labour unionisation rate is associated with lower forecast accuracy and higher forecast dispersion, suggesting that financial analysts predominantly play a “complementary role” rather than a “substitutive role” when firms are facing significant uncertainty in human capital. Overall, our study has important implications for managers, financial analysts and regulators, by highlighting the value and hence the necessity of non-financial information disclosure specific to a key intangible asset of firms, i.e., their employees.

Air pollution and environmental information disclosure: An empirical study based on heavy polluting industries

China is facing some of the worst air pollution in the world and corporate environmental information disclosure (EID) has become an increasingly popular approach for environmental regulation. However, there is a lack of evidence on the corporate EID impacts of air pollution. This study examines the correlation between air pollution and corporate EID using a panel data collected from listed Chinese firms in heavy polluting industries from 2014 to 2018. The empirical results reveal that the relationship between air pollution and corporate EID is significantly negative. The air pollution in eastern regions has greater impacts on corporate EID compared with the mid-western regions. Moreover, impacts air pollution has on corporate EID also differ in enterprises located in regions with different environmental information transparency. This study provides a snapshot of the dialogues between air pollution and EID development.

Does shareholder litigation affect the corporate information environment?

Using the staggered adoption of universal demand (UD) laws in the United States, we show that the reduction in shareholder litigation risk deteriorates firms’ stock price informativeness. This reduction in stock price informativeness is due to firms changing the way they invest rather than obfuscating or withholding firm-specific information. We also show that the reduction in litigation risk is associated with higher investment-price sensitivity. Overall, despite causing a deterioration in firms’ information environment, the reduction in litigation risk does not appear to harm shareholder wealth. Our paper offers novel insights into the net economic benefits of shareholder litigation laws.

The impact of the amount of environmental information disclosure on financial performance: The moderating effect of corporate internationalization

AbstractBased on the data of A‐share heavily polluting listed companies in China from 2010 to 2017, this study uses content analysis and multiple linear regression to investigate the effect of the amount of corporate environmental information disclosure on financial performance and the moderating effect of corporate internationalization on this relationship. The results confirm the significant negative impact of the amount of environmental information disclosure on financial performance, while corporate internationalization has a positive moderating effect on this relationship. The degree of regional marketization and corporate ownership influences this moderating effect. Thus, a mandatory disclosure mechanism with a legal basis and clear standards is necessary, but should include diverse policies and improved incentive mechanisms in light of the differences in regional development in China. In addition, international organizations should encourage companies to increase their international operations. The robustness test shows that the results are reliable.

Military executives and corporate environmental information disclosure: Evidence from China

This article provides empirical evidence on whether and how executives’ military experience affects firms’ environmental information disclosure (EID). Using the panel data analysis method based on a sample of 2614 listed Chinese companies from 2007 to 2016, we find that companies with military executives have lower EID than those without military executives. We further divide the executives into chairpersons and CEOs and find that military chairpersons have a significant negative effect on corporate EID, whereas military CEOs have no significant effect on the quality of EID. The results remain robust in a series of robustness tests. Our seemingly against common sense findings suggest that although firms run by executives with the military experience may have a strong environmental performance, the quality of EID of those firms is not necessarily high possibly due to the lack of skills or willingness of military executives in communicating their environmental performance with external stakeholders. Implications of these findings for theory and practice are discussed.

New media environment, environmental information disclosure and firm valuation: Evidence from high-polluting enterprises in China

With firms gradually becoming the subject for energy consumption and environment pollution, it is pivotal that they disclose corporate environmental information for social supervision and fulfillment of social responsibility. Thus, it has been a hot topic as to how to improve the quality of corporate environmental information disclosure (EID). Drawing on the data of listed companies in the high-polluting industries between 2014 and 2017 in China, this paper conducts an empirical study on three questions with an in-depth investigation: (1) does the new media environment help in improving corporate EID quality; (2) whether this relationship is influenced by the property ownership of the corporate and local economic pressure; (3) what is the economic consequence of corporate EID. Our findings indicate that new media environment has a significantly positive effect on corporate EID quality, especially to state-owned enterprises. And firms with higher environmental disclosure quality enjoy better firm valuation. These findings help identify new driving factors of corporate EID and confirm that new media environment has performed a supplementary role in regulating corporate environmental behaviors, which can help develop green finance and promote ecological civilization.

Disclosure Frequency, Information Environment, and Cost of Capital under Regulation Fair Disclosure in the Korean Market

Disclosure policy contributes to improve sustainable corporate information environment by mitigating information asymmetry surrounding companies. Economic theories generally support that more disclosures reduce the level of information asymmetry, increase stock liquidity, and thus decrease the costs of equity capital. However, the effect of corporate disclosure in emerging markets is not clearly predictable because of the potential information leakage prior to disclosure. Considering this issue, this study focuses on the Regulation Fair Disclosure which prohibits selective disclosure. Using the earnings-to-price ratio as a proxy of the costs of equity, the study finds that disclosure frequency is negatively related to the cost of equity capital. However, I do not find evidence that disclosure is negatively related to the implied costs of equity capital (ICOE). The results of the quintile analysis suggest that this inconsistency is attributable to the better information environment of the ICOE sample. The findings of this study have implications for disclosure regulations in emerging markets, given that the existing literature casts doubt on the effectiveness of corporate disclosure in such markets.