Beyond symbolic and substantive: Strategic disclosure of corporate environmental information in China

Abstract

Under increasing regulatory pressure to disclose environmental impacts, corporate environmental information disclosure (EID) is becoming more prevalent. However, the motives for EID and disclosure approaches (i.e., symbolic or substantive) remain controversial. Using a sample of data for 742 listed manufacturing firms in China across 3 years, we provide evidence to show that the level of EID is significantly positively associated with a firm's advertising intensity and that firms in moderately competitive industries have a higher propensity for adopting an EID-based differentiated strategy than firms in stronger or weaker competitive industries. We also find that firms that are more sensitive to environmental issues strategically understate their environmental impact when directly facing consumers. Our results suggest that the implementation of corporate EID is strategic and that firms have strong market motives, even under regulatory pressure to demonstrate legitimacy. We discuss this study's contributions to research on EID theory and implications for strategic EID management.

Can voluntary environmental regulation promote corporate technological innovation?

“…All of these documents have been reviewed by the government; thus, their credibility and authority can be guaranteed. Because the indicators of the classification are highly consistent with the disclosed information in most corporate social responsibility reports, this evaluation system has been widely applied to measure the EID of China's listed firms (e.g., Bi, Peng, & Zuo, ; Meng, Zeng, Xie, & Zou, ). Then, referring to the research of Clarkson et al (), we set scores for various environmental information indicators.…”

Monitoring effect of transparency: How does government environmental disclosure facilitate corporate environmentalism?

“…They must focus their attention on economic affairs to deal with the pressure of competition (Meng, Zeng, Xie, & Qi, 2016). Furthermore, an intense IC is usually associated with lower average industrial returns, making it unlikely that firms will have too many slack resources (Meng, Zeng, Xie, & Zou, 2019). Yet the CER strategy tends to expose a firm to more pressure by requiring financial resources, human resources, and other inputs.…”

The Relationship between Environmental Information Disclosure and Profitability: A Comparison between Different Disclosure Styles

“…In order to attract attention in both the product market and capital market or deal with media pressures, many firms choose to release environmental information on a regular basis. Since EID is voluntary, regulatory authorities do not specify the format and content of the information disclosure [12]. Firms often have their own preferences to release information for different purposes.…”

“…It is one of the important initiatives that firms take to fulfill their environmental responsibility and to accept social supervision. Research on the determinants of EID is extensive [3,4,5,6,7,8,9,10,11,12], while research on its consequences is relative scarce [13]. This is precisely the issue that both business managers and policy makers are more concerned about [14].…”

“…In addition, there is no enforcement and mandatory requirements for disclosure contents [16,19]. In order to maximize firms’ interests, executives usually disclose selectively [10,33,34], so the difference of disclosure style between firms exists [5,12]. Will the disclosure style affect firm performance?…”