Research On The Impact Of Analysts’ Earnings Pressure On Corporate Environmental Information Disclosure

Environmental information disclosure is an important manifestation of corporate environmental governance behaviors,and is a key way for shareholders and other stakeholders to grasp corporate environmental governance information.Improving the transparency of environmental information disclosure is of great significance in reducing the environmental information asymmetry among different stakeholders,enhancing stakeholders’ awareness of corporate environmental performance and risks,enhancing supervision of corporate environmental violations,and prompting firms to improve their environmental governance.Although China has introduced multiple regulations to prompt firms to enhance the transparency of their environmental information,the transparency of environmental information disclosure of Chinese firms still presents a generally low situation.The opaque environmental information disclosure makes firms face higher risk of environmental punishment,bear higher capital cost and financing constraints,thus hindering the sustainable development of firms.Besides,the opaque environmental information disclosure also causes investors and creditors to implement adverse selection under the condition of information asymmetry,resulting in polluting firms occupying green funds while environmental firms are faced with financing difficulties,hindering the implementation of green finance policies and affecting the stability of the capital market.In view of the importance of environmental information disclosure,the academic community has been committed to exploring the influential factors of corporate environmental disclosure from a multi-dimensional perspective,aiming to analyze the reasons that hinder firms’ willingness to improve the transparency of environmental information disclosure.Analysts are important participants in the capital market,and they represent the attention and supervision of the capital market to the management decisions of firms.By virtue of their superior information discovery and processing ability,analysts can deepen investors’ cognition of corporate environmental governance,exert supervision pressure on corporate environmental governance decisions,and supervise firms to enhance the transparency of environmental information disclosure.Nevertheless,the existing research only pays attention to the promotion effect of analysts’ supervision on environmental information disclosure,but does not pay attention to the damage that analysts’ earnings expectation pressure may bring to environmental information disclosure.The existing research generally believes that the analysts’ consensus earnings forecast target is an important benchmark for the capital market’s expectation for corporate earnings.Therefore,analysts’ earnings pressure will prompt managers to take myopic management decisions to rapidly increase short-term earnings to meet or exceed analysts’ earnings expectations.These myopic decisions often come at the expense of long-term value and performance of firms.More importantly,the negative impact of analysts’ earnings pressure is not only limited to the economic performance of firms,but also brings serious negative impact on the environmental performance of firms.Managers facing earnings pressure will have a strong incentive to take myopic environmental governance decisions,damage the environmental performance,weaken the transparency of environmental information disclosure,and then undermine the long-term values and sustainable developments of firms.However,evidence on whether and how analysts’ earnings pressure affects the transparency of environmental information disclosure remains scarce.In view of this,based on the goal-setting theory,information asymmetry theory and principal-agent theory,this study firstly explores the impact mechanism of analysts’ earnings pressure on corporate environmental information disclosure.Besides,considering that the relationship between analysts’ earnings pressure and environmental information disclosure will be affected by the internal corporate governance and the external environmental regulations,this study further explores the moderating effect of corporate governance and environmental regulation on the relationship between analysts’ earnings pressure and environmental information disclosure based on principal-agent theory and legitimacy theory.Finally,this study also examines the impact of firms facing analysts’ earnings pressure choosing to reduce the transparency of environmental information disclosure on their subsequent corporate value.Based on the above theoretical analysis framework,this study takes Chinese listed firms from Shanghai and Shenzhen stock markets as research samples to conduct a series of empirical tests,including regression analysis,endogeneity tests,sensitivity tests,and finally draws the following conclusions:First,analysts’ earnings pressure has a negative influence on the transparency of corporate environmental information disclosure.The abatement of environmental expenditure is the main mechanism of the negative effect of analysts’ earnings pressure on environmental information disclosure.Specifically,when firms are faced with higher analysts’ earnings pressure,they will have stronger motivation to reduce environmental expenditure to meet analysts’ earnings expectations,resulting in deterioration of environmental performance.Firms will reduce their willingness to transmit environmental governance information and ultimately choose to reduce the transparency of environmental information disclosure.Furthermore,based on the perspective of the source of analysts’ earnings pressure,local governments’ emphasis on corporate earnings and corporate pollution characteristics,this study explores the heterogeneous impact of analysts’ earnings pressure on corporate environmental information disclosure.The results show that the negative impact of analysts’ earnings pressure on corporate environmental information disclosure is more significant in firms with high income complexity,low information transparency,high contribution to brokerage economic income,analysts with limited forecast experience,state-owned enterprises,firms with high contribution to local economy and high polluting firms.Besides,the expansion study finds that corporate historical earnings pressure and peers’ historical earnings pressure also have an adverse impact on corporate environmental governance.Second,corporate governance mechanisms can have a moderating effect on the relation between analysts’ earnings pressure and environmental information disclosure.Specifically,pressure-sensitive institutional ownership and stock option incentives will exacerbate the negative impact of analysts’ earnings pressure on corporate environmental information disclosure.Conversely,independent director governance and securities background director governance can effectively alleviate the negative impact of analysts’ earnings pressure on environmental information disclosure,and this mitigating effect is more pronounced for nonfinancial environmental information disclosure.Especially,when regional environmental law enforcement supervision is weaker,the moderating effects of pressure-sensitive institutional ownership,independent director governance,securities background director governance,and stock option incentives on the relationship between analysts’ earnings pressure and environmental information disclosure is more significant.Third,regional environmental judicial supervision and regional green credit development can effectively alleviate the negative impact of analysts’ earnings pressure on environmental information disclosure,and this mitigating role is more pronounced for nonfinancial environmental information disclosure.Specifically,when regional judicial supervision and green credit development become stronger,firms will face higher environmental legitimacy pressure,environmental litigation risks and credit financing constraints will also increase,thus resisting the motivation of firms facing analysts’ earnings pressure to adopt myopic environmental decisions,forcing them to obtain the environmental legitimacy with high-level environmental disclosure.Specifically,in firms with higher economic contributions and regions with weaker governments’ environmental administrative supervision,environmental justice and green credit can more significantly alleviate the adverse impact of analysts’ earnings pressure on corporate environmental disclosure.Fourth,under analysts’ earnings pressure,firms usually engage in reducing the transparency of environmental information disclosure,which further damages the subsequent corporate value.That is to say,analysts’ earnings pressure will prompt firms to make myopic decisions to reduce the transparency of environmental disclosure,which will further exacerbate the environmental information asymmetry,trigger distrust and negative reactions from the capital market to corporate environmental governance,and lead to a decline in the subsequent corporate value.Compared with existing research,the innovations and contributions of this study are:First,based on the perspective of analysts’ performance pressure effect,this study confirms the negative impact of analysts’ earnings pressure on the transparency of environmental disclosure,extending the research on the influencing factors of environmental disclosure.Existing research has focused on the positive effects of analysts’ supervision on environmental information disclosure and other environmental governance behaviors,but has overlooked the negative impact of analysts’ earnings pressure on the transparency of environmental information disclosure.This study provides novel evidence for exploring the hindering factors of corporate environmental information disclosure.Second,innovatively exploring the negative impact of analysts’ earnings pressure on corporate environmental governance behaviors from the perspective of corporate environmental information disclosure,this study expands the relevant research on the negative consequences of managers’ myopic behaviors caused by analysts’ earnings pressure.Existing research on the consequences of analysts’ earnings pressure often focuses on the damage to economic performance of firms,with less attention paid to the damage of analysts’ earnings pressure to corporate environmental governance behaviors.Although recent studies have focused on the impact of analysts’ earnings pressure on reducing environmental expenditure and increasing pollution emissions,there is still no research on the influence of analysts’ earnings pressure on environmental information disclosure.Environmental disclosure is related to environmental expenditure and environmental performance.Therefore,this study expands the research on the negative impact of analysts’ earnings pressure on corporate ecological governance from the angle of environmental information disclosure.In addition,this study innovatively verifies that conflicts of interest among analysts,lack of analysts’ forecasting experience,and the emphasis of local governments on corporate earnings can lead to firms facing analysts’ earnings pressure being more inclined to make decisions that harm the transparency of environmental information disclosure.Third,this study provides insights from the perspective of adjusting internal corporate governance to alleviate the adverse effects of analysts’ earnings pressure on corporate environmental governance.Previous studies have found that corporate governance factors significantly affect corporate managers’ reaction to analysts’ earnings pressure and corporate environmental governance decisions.This article integrates independent literature streams on the relation between corporate governance and analysts’ earnings pressure,as well as the relation between corporate governance and corporate ecological governance,revealing how to alleviate the potential adverse effects of analysts’ earnings pressure on environmental governance by adjusting the corporate governance environment.Fourth,this study focuses on how the regional environmental judicial supervision and green credit development can effectively alleviate the negative impact of analysts’ earnings pressure on corporate environmental governance behaviors,which has not been documented in existing research.Although existing research has found that governments’ administrative law enforcement can effectively alleviate the negative impact of analysts’ earnings pressure on corporate environmental governance,they have not paid attention to the mitigating effects of environmental judicial supervision and green credit development.In emerging economies,the effectiveness of governments’ environmental administrative law enforcement is often poor.Environmental justice and green credit may be more effective environmental regulations to resist the harm of analysts’ earnings pressure on corporate environmental governance.Fifth,this study supports the speculation of existing research that analysts’ earnings pressure drives managers to adopt myopic environmental governance decisions at the expense of sacrificing environmental performance targets,thereby damaging the long-term corporate value.Generally,environmental information disclosure is of great significance for reducing the capital cost of firms,enhancing the subsequent corporate value and sustainable development ability.However,this study notices that firms under the analysts’ earnings pressure generally weaken the transparency of environmental information disclosure,which will adversely affect the subsequent corporate value.