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The effect of expected financial performance on corporate environmental responsibility disclosure: evidence from China

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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.

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  1. School of Management, Huazhong University of Science & Technology, Wuhan, People’s Republic of China

    Yanqi Zeng, Zongjun Wang & Xinxin Zhao

  2. Waikato Management School, The University of Waikato, Hamilton, New Zealand

    Muhammad Awais Gulzar

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  1. Yanqi Zeng
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Correspondence to Zongjun Wang.

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Zeng, Y., Gulzar, M.A., Wang, Z. et al. The effect of expected financial performance on corporate environmental responsibility disclosure: evidence from China. Environ Sci Pollut Res 27, 37946–37962 (2020). https://doi.org/10.1007/s11356-020-09719-8

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