Empirical Research On Environmental Disclosure Of Chinese Listed Companies Based On Public Pressure Motives

Since late seventies of 20 century, as the progress of reformation moved on, Chinese economy has achieved rapid development. But environmental pollution problems caused by corporation operating activities became worse and worse. Public has paid more attention on corporations'failure to fulfill environment protection obligation and environmental information disclosure. In late 2005, Songhua River pollution and North River cadmium pollution events caused much difficulty on normal lives of backward position people and great concerns of public and news media, which will doubt if corporations fulfill due environment protection obligation and require more environmental information disclosure to satisfy their information needs. The criticism and condemnation to some heavy pollution industries'high earning capability will also made large negative effects on corporations. In the meantime, government will implement more strict control and supervision procedures on heavy pollution industries, which made large public pressure on oil chemical industry and steel metallurgy industry. Some scholars'study shows that against the background of bearing public pressure caused by outburst pollution events, other than earnings management, increasing environmental information disclosure in financial reports is also an effective method of easing public pressure. Foreign scholars has made plentiful research results of environmental information disclosure problems, while domestic scholars'researches mainly focus on current position, content, practical operation of environmental information disclosure. There are no related empirical researches from the relationship of environmental disclosure and earnings management. So, after Songhua River pollution and North River cadmium pollution events, this paper made further research based on political cost theory of earnings management and incentives theory of environmental information disclosure to examine whether listed companies of oil chemical industry and steel metallurgy industry lower reported earnings, increase the degree of environmental disclosure and the existence of public pressure incentives of disclosure. The theoretical significance of this paper is to examine incentives of lowering public pressure from a unique research view. Also, it can give some references to supervision institutions to make more detailed standards of environmental information disclosure.First, the paper reviews related literature of environmental information disclosure and earnings management. In the field of environmental accounting, the problem of environmental is the one of the first research scope. In the last few years, domestic scholars has made plentiful research on current position of environmental information disclosure, which shows that heavy pollution industry listed companies made more disclosure and there was a significant trend of increasing disclosure. The format of disclosure was mainly in qualitative methods and it can not satisfy information needs of government and public. From the influence factors of environmental information disclosure, scholars'empirical studies had shown that firm size, firm performance, liability degree, ownership and government structure could influence the disclosure of listed companies. From political cost incentives of earnings management, it has been proved that under large public pressure corporations tended to lower earnings through earnings management, which demonstrated that management treated earnings management as an effective way of lowering political cost.Second, the paper raised four research hypotheses on the base of summarizing related literature. According to validity theory, when pollution events influences the validity of corporation, whose management will implement several procedures to maintain its validity including disclosing more environmental information in financial reports. Public pressure theory emphasizes the incentive from another view, that is, corporation may increase social responsibility or environmental information disclosure in annual reports to response public pressure. Then the paper raised hypotheses as follows: after two pollution events, related heavy pollution industry listed companies will lower income through accrual items and increase the degree of environmental disclosure; companies bearing more public pressure will disclose more environmental information; companies with less earnings management will disclose more environmental information.Third, the paper selects oil chemical industry and steel metallurgy industry listed companies of Shanghai and Shenzhen exchange market from 2004-2006 as research samples, uses content analysis method to measure environmental disclosure and chooses ratio of pollution business revenue as substitute variable of public pressure. Through descriptive statistics, mean test, relation analysis and multi-variable regression analysis, the empirical results shows that in 2005 under public pressure sample listed companies significantly lowered income through accrual items and increase the degree of environmental information disclosure; the more pressure the company born the more environmental information it disclosed; further empirical analysis of the relationship between environmental disclosure and earnings management demonstrated that there existed differences between two heavy pollution industries. For oil chemical industry companies, there was no evidence which shown companies with more environmental disclosure would less lower income through discretional accrual items, that is, the activities of significantly increasing of disclosure was just a"stress reaction"under public pressure. While for steel metallurgy industry companies, there existed positive relationships between environmental disclosure and earnings management, which shown that management realized that increase of information disclosure could lower public pressure and substitute earnings management to some extent, so the less income they lowered the more environmental information they disclosed. At this time, the activities of increasing disclosure was not just a"stress reaction"under public pressure but also reflected a composite strategy decision of management under public pressure.At last, on the base of the research results of the paper, it gives some pointed advices and indicates the limitation and future research directions.