Environmental Regulation And Enterprise Earnings Quality

Since the 1970s,while strengthening environmental regulation to control industrial pollution,the impact of environmental regulation on economic growth,industrial performance and international competitiveness has also aroused great concern.Environmental regulation is considered to affect the performance and competitiveness of enterprises in the short term.As a developing country,the implementation of environmental regulation policy in China is bound to have a certain impact on the economic development and industrial performance of related enterprises.When the enterprise performance changes,based on the motivation of earnings management,the enterprise will carry out the operation of earnings management in order to maximize their own interests,thus reducing the quality of earnings.If the environmental regulation policy affects the earnings quality of enterprises,the implementation of environmental regulation policy will not only affect the short-term performance of enterprises,but also increase the negative effect on investors and capital market by strengthening the earnings management operation of relevant enterprises.It will affect the transparency of the capital market.This paper uses the quarterly data of China’s listed enterprises from 2014 to 2018 to construct a multiple difference model for empirical test.First,it tests the impact of the central environmental protection supervision policy on the earnings quality of listed enterprises,and makes a robustness test.Then it explores the mechanism through which the central environmental supervision policy affects the earnings quality of listed companies.Finally,through the heterogeneity analysis,this paper explores the performance of the central environmental supervision policy on the earnings quality of listed companies with different pollution intensive,different scale and different ownership types.The results are as follows.First,the central environmental protection supervision policy will significantly reduce the earnings quality of listed enterprises,mainly for the central environmental protection supervision policy will promote the upward earnings management of listed enterprises,thus reducing the earnings quality of listed enterprises.Second,the implementation of the central environmental protection supervision policy will reduce the performance of enterprises.In the short term,the central environmental protection supervision policy does not fully stimulate the technological innovation of enterprises,so the increased cost of the central environmental protection supervision policy can not be completely offset by the innovation compensation benefits,and the central environmental protection supervision policy will cause the decline of enterprise performance.When the performance of enterprises declines,due to the performance expectation gap,enterprises will maximize their own interests and conduct earnings management operations,thus reducing the earnings quality of enterprises.Third,the central environmental supervision policy will promote the earnings management of water pollution intensive enterprises and air pollution intensive enterprises and reduce their earnings quality.Moreover,compared with the air pollution intensive enterprises,the central environmental supervision policy reduces the surplus quality of water pollution intensive enterprises to a greater extent.For small-scale enterprises and private enterprises,the central environmental supervision policy will also significantly promote their earnings management operations,thus reducing the earnings quality of small-scale enterprises and private enterprises.This paper discusses the impact of environmental regulation on earnings quality of listed companies,and analyzes the impact mechanism of environmental regulation on earnings quality.It is helpful for the government to take corresponding measures in advance and standardize relevant industries.It can also provide policy basis for regulatory authorities to minimize the negative effects on investors and capital markets.Promote the stable and healthy development of enterprises and capital market.