The Effect of Mandated CSR Disclosure on the Pollution Levels of Publicly-Traded Chinese Firms

Abstract

This paper examines whether mandatory corporate social responsibility (CSR) reporting affects corporate environmental degradation (or pollution) levels in China. Starting in 2008, Chinese stock exchange listing requirements mandated that certain firms issue CSR reports. These mandated firms are fairly well diversified across industries and, other than pollution, appear to have generally changed in similar ways to control firms across the sample period. The results of a difference-in differences regression show that mandated firms reduced their environmental impact, on average, relative to firms not required to issue CSR reports, whether including or excluding a variety of controls for other possible causal factors for differential pollution. Firms subject to mandatory disclosure decreased both direct and indirect (i.e., supply chain) environmental impacts, although 86 percent of the pollution reduction results from direct responses. Mandated manufacturing, utilities and natural resources, and real estate firms reduced relative emissions more than mandated services firms. The results are robust to alternative selection procedures, alternative control samples, and a process of bootstrapping standard errors.

Keywords: Disclosure Regulation, Environmental Performance, Corporate Social Responsibility, Sustainability Reporting

JEL Classification: F64, H23, K32, M41, M48, O44, P28, P48, Q56