Incentives and Disincentives of Corporate Environmental Disclosure: Evidence from Listed Companies in China and Malaysia

Abstract

Previous studies on motivations for corporate environmental disclosure (CED) in emerging countries are generally undertheorized and have neglected to investigate disincentives. This study addresses this gap using legitimacy theory to determine whether differences exist between Chinese and Malaysian managers in relation to incentives and disincentives for CED. Our findings reveal that differences exist suggesting that legitimization strategies, if employed, vary and perceptions of legitimacy threat differ between countries. The study also reports that the dominating incentive for managers in both countries is to appear reputable; implying a strategic CED approach is undertaken in an attempt to alter public perceptions about the legitimacy of an organization. Interestingly, the incentive of regulatory pressure was found insignificant in both countries in persuading companies to engage in CED. Finally, potential damage to a company's reputation received considerable support from all respondents revealing a degree of uncertainty about CED. Overall, the study contributes to the literature on CED practices in emerging economies and points to some policy suggestions. © 2015 Wiley Periodicals, Inc.

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

“…Existing theories are inconclusive. Many studies have attempted to identify the motivation behind corporate EID (Hahn & Kühnen, ; Hu & Karbhari, ). There are two main competing theoretical explanations—voluntary disclosure theory and legitimacy theory—both of which are derived from political economy theory and stakeholder theory (Cho, Freedman, & Patten, ).…”

Post-regulation effect on factors driving environmental disclosures among Chinese listed firms

“…Legitimacy theory originated from the interaction between the firms and the society by the social contract assumptions (Hu and Karbhari, 2015). The social contract assumption supposed that firms and society are bound by an implied contract that legitimize the operations of the firm within a society and that failure to meet the expectations of the society may cause the firm to be penalized by the society (Deegan, 2002).…”

“…The rapid growth of Chinese economy with the resultant environmental deterioration, led the Chinese government to implement policies that could encourage companies to disclose environmental information (Meng et al, 2013). The disclosure was initially made compulsory only for companies causing pollution under the regulation of the National Environmental Protection Agency (NEPA), while other companies were encouraged to disclose voluntarily (Hu and Karbhari, 2015). The implication was that only few of such companies voluntarily disclosed environmental information in their annual reports as against what is found in developed countries (Hu and Karbhari, 2015).…”

“…The disclosure was initially made compulsory only for companies causing pollution under the regulation of the National Environmental Protection Agency (NEPA), while other companies were encouraged to disclose voluntarily (Hu and Karbhari, 2015). The implication was that only few of such companies voluntarily disclosed environmental information in their annual reports as against what is found in developed countries (Hu and Karbhari, 2015). For example, Baboukardos (2018) observed the moderating effect of well spelt-out regulation on EID for French companies and encouraged the adoption of same for other countries.…”

“…To date there has been limited work on this subject on Chinese market. According to Hu and Karbhari (2015), most extant studies on the subject, lack sufficient information and are qualitative in nature. In addition, the data used in the few quantitative studies (Liu et al, 2010;Meng et al, 2013;Zeng et al, 2010) found in literature is dated and mainly around 2000 to 2008, which was the period when the enforcement of EID disclosure was weak in China.…”