Green finance, management power, and environmental information disclosure in China—Theoretical mechanism and empirical evidence

Jiazhan Gao · Guihong Hua · AbidAli Randhawa · Mahamane Famanta · Zilian Li · Aliya Jamila Alfred +3 more

31 citations0/0 files storedBusiness Ethics the Environment & Responsibility

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Corporate Social Responsibility Reporting Auditing, Earnings Management, Governance Sustainable Finance and Green Bonds

Abstract

Abstract Green finance plays a crucial bridge as an intermediary between finance and the environment, facilitating resource allocation. The disclosure of environmental information (EID) is vital for promoting sustainable economic development. This study utilizes panel data covering the period from 2012 to 2019, focusing on Chinese companies listed in high‐polluting industries. The findings demonstrate that green finance policies have a significant positive impact on EID, while increased managerial power has a detrimental effect. However, green finance policies can mitigate the negative consequences arising from moral hazard and adverse selection resulting from managerial power. They enhance the quality of EID by restricting long‐term loan resources for polluting entities. The heterogeneity test reveals that the effectiveness of green finance policies in promoting EID varies across different regions of China. In non‐state‐owned companies, green finance policies are more effective in constraining managerial power. The moderating effect of green finance on managerial power is weakened by improvements in internal control. Green financing can offset the adverse impact of managerial power on EID when debt levels are high. Our research plays a crucial role in advancing micro‐academic studies in the field of green finance. By strengthening internal controls for corporate managers and promoting EID policies, we provide essential support and guidance to decision‐makers.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1983Separation of Ownership and Control 2001Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature 2003Earnings management and investor protection: an international comparison 2010Does Corporate Social Responsibility Affect the Cost of Capital?2002Testing the pecking order theory of capital structure 1998Law, Finance, and Firm Growth 1988Managerial control of voting rights

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