The effect of expected financial performance on corporate environmental responsibility disclosure: evidence from China
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RESEARCH ARTICLE
The effect of expected financial performance on corporate environmental responsibility disclosure: evidence from China Yanqi Zeng 1 & Muhammad Awais Gulzar 2 & Zongjun Wang 1 & Xinxin Zhao 1 Received: 28 March 2020 / Accepted: 12 June 2020 # Springer-Verlag GmbH Germany, part of Springer Nature 2020
Abstract Nowadays, firms spend a great deal of effort on Corporate Environmental Responsibility (CER) disclosure. From prospect theory, firms might disclose more CER information when they fail to achieve expected financial performance of the organization. We have constructed a CER disclosure index based on the “Guidelines for Environmental Information Disclosure of Listed Companies” issued by the Ministry of Environmental Protection of China in 2010. Using content analysis, we analyze 397 Chinese manufacturing Shanghai A-share listed firms from 2011 to 2017 (2090 firm-year observations) to investigate the relationship between corporate expected financial performance and CER disclosure. Our results show that, firstly, when the firm does not achieve the expected performance that is when the actual expectation is lower than the expected performance of the organization, the disclosure of corporate environmental responsibility increases; secondly, we have explored the moderating effect of industry categories; we have found that when firms fail to achieve the expected performance of the organization, light polluting firms are more inclined towards disclosing the environmental responsibility information than heavy polluting firms. Additionally, we have also studied the behavior of corporate environmental responsibility disclosure in the case of analysts expecting performance as a point of reference and got the same results. Keywords Expected financial performance . Corporate environmental responsibility disclosure . Content analysis . Prospect theory
Introduction As the largest developing country and transitional economy in the world, China is facing the most severe ecological challenges (Liu and Diamond 2005; Zeng et al. 2008). A recent BP energy report showed that in 2017, China contributed the highest percentage (27.6%) of the global carbon emissions, and its annual growth rate of emissions from 2006 to 2016 was 3.2% (BP 2018, p. 49). The mitigation of Chinese environmental problems is of great significance to the global ecology. As an important subject of society, Chinese firms have Responsible Editor: Nicholas Apergis * Zongjun Wang [email protected] 1
School of Management, Huazhong University of Science & Technology, Wuhan, People’s Republic of China
2
Waikato Management School, The University of Waikato, Hamilton, New Zealand
become the main part of environmental pollution (Wu et al. 2017) and are at the center of the Central Government’s plans to protect China’s environment (Xi 2017). However, the motivation for Chinese firms to disclose environmental responsibility information is mainly due to government pressure. Therefore, even though many firms have disclosed environmental information in
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