This study takes on a corporate political activity (CPA) perspective to investigate how CPA affects environmental sustainability disclosure among firms in China and whether the disclosure level varies across ownership structures and environmental sensitivity statuses.
The sample comprises 652 corporate social responsibility (CSR) reports released by firms in China during 2008-2010. Data is coded through a content analysis procedure before being analyzed using regression analysis.
We find a significant and positive association between CPA and environmental sustainability disclosure. However, the effect of CPA on environmental sustainability disclosure is significantly negative among firms in the environmentally sensitive industries (ESIs) and privately owned enterprises (POEs). More specifically, a firm’s environmental disclosure level is lower when the proportion of board members with a significant status, such as party chief of the Communist Party, is higher among firms in ESIs and POEs. This implies that firms with guanxi (i.e. Chinese-specific CPA) are more likely to be free from trouble.
This empirical study offers important evidence on the fulfillment of environmental sustainability policies and the effectiveness of regulatory controls that China has used in the development towards a low-carbon economy.