Corporate environmental responsibility in China: a strategic political perspective

Abstract

Purpose Against the background of the enormous economic transition China is undertaking, government intervention over corporate behavior is a frequent and, arguably, necessary measure. Among the most serious problems facing China, economically and reputationally, are environmental issues. So, how is the government intervening in the environmental performance of Chinese enterprises? And how are Chinese enterprises responding? These are the questions to be answered in this study. Design/methodology/approach This paper sampled listed companies on China’s Shanghai and Shenzhen Stock Exchanges. The data were collected from the HeXun corporate social responsibility report, CSMAR and WIND databases. A Tobit model was used to conduct the main 2SLS regression analysis, and the robustness tests followed the propensity score matching method. Findings The analysis shows that environmental performance is positively related to the government subsidies a company receives. The “Eight-point Regulation of the Centre” crack-down on social corruption introduced in 2012 has weakened rent-seeking overall, but rent-seeking behavior through the cloak of corporate environmental performance has become more serious. As a result, non-polluting and state-owned enterprises are significantly less concerned about their environmental performance, while polluting and private enterprises are more motivated to become good environmental citizens. Practical implications This research provides a greater understanding of the drivers behind environmentally-responsible behavior in Chinese companies. These insights can be used by policymakers and environmental regulators to incentivize a more widespread ground-swell of change across the gamut of Chinese business. Social implications Environmental policy and practice informed by research-driven recommendations can not only make valuable contributions to the health and well-being of Chinese society but also, as a significant contributor to climate change, environmental reforms have global benefits. Originality/value This study explores the motivations behind rent-seeking associated with environmental investment. The findings expand the research horizon of relevant literature on corporate political rent-seeking and deepen the understandings of the economic consequences of corporate investment into environmental practice. The results provide empirical evidence for the Chinese government to implement environmental regulations based on incentives beyond simple profit-making.

Government Regulation, Executive Overconfidence, and Carbon Information Disclosure: Evidence From China

“…The existing research on government environmental regulation mainly focuses on the type, impacts, and effectiveness of environmental regulation (Ziegler et al, 2012;Cheng et al, 2017;Liu and Li, 2019). For example, existing studies have explored the effects of government regulation on firms' environmental performance (Akram et al, 2018;Lu, 2020;Wang et al, 2020), green technology innovation (Kammerer, 2009;Ai et al, 2021), sustainability, and corporate social responsibility strategies (Schmutz et al, 2020).…”

Board Network and CSR Decoupling: Evidence From China

“…Existing research argues that CSR practices are significantly affected by political connections in the Chinese market ( Li et al, 2015 ; Lin et al, 2015 ; Wang et al, 2020 ). Therefore, for the results in the main analysis, another alternative explanation is that the relationship between board centrality and CSR practices may be caused by political connections.…”

Examining the social pressures on voluntary CSR reporting: the roles of interlocking directors

“…Notably, CSR reporting tends to be a response to regulatory pressures (Aguilera et al , 2007; Marquis et al , 2016; Wang et al , 2020). Firms follow regulations and guidelines to gain legitimacy from key resource providers (Arena et al , 2018).…”

“…Corporate social responsibility (CSR) reporting is a widely accepted procedure for firms to disclose their performance in multiple domains, including environmental protection, labour welfare, protection of human rights, community services, contribution to society and pursuit of product safety. While researchers largely agree that regulatory pressures positively affect firms’ decisions to voluntarily issue CSR reports (Aguilera et al , 2007; Ioannou and Serafeim, 2012; Luo et al , 2017; Marquis and Qian, 2014; Wang et al , 2020), the variation in CSR reporting of firms under the same regulatory pressure remains unexplained. The different responses to the same regulatory pressure suggest that firms may interpret and make sense of requirements differently.…”