IDEAS home Printed from https://ideas.repec.org/a/bla/finrev/v61y2026i1p93-120.html

Public Attention to the Environment and Corporate Environmental Violations

Author

Listed:
  • Chunyu Zu
  • Rui Dong
  • Nianhang Xu

Abstract

Using environmental violations data of listed firms in China from 2011 to 2018, we examine the effect of public attention on corporate environmental violations. Our findings suggest that public attention to the environment in the city where a firm is located can reduce the probability and frequency of the firm's environmental violations. Furthermore, this effect is more salient for firms that contribute more to the economy and those in cities with higher economic pressure. We identify three potential mechanisms: public environmental participation, governments’ environmental governance, and firms’ environmental awareness. Additional tests show that firms located in areas with higher public environmental attention experience a larger stock price impact and higher financial constraint after committing environmental violations. Finally, public environmental attention has a spillover effect on firms in adjacent cities. This paper reveals a new determinant of corporate environmental violations and provides important implications for environmental governance.

Suggested Citation

  • Chunyu Zu & Rui Dong & Nianhang Xu, 2026. "Public Attention to the Environment and Corporate Environmental Violations," The Financial Review, Eastern Finance Association, vol. 61(1), pages 93-120, February.
    • Handle: RePEc:bla:finrev:v:61:y:2026:i:1:p:93-120
    DOI: 10.1111/fire.70012
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/fire.70012
    Download Restriction: no
    File URL: https://libkey.io/10.1111/fire.70012?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Wang, Hua & Wheeler, David, 2005. "Financial incentives and endogenous enforcement in China's pollution levy system," Journal of Environmental Economics and Management, Elsevier, vol. 49(1), pages 174-196, January.
    2. Dong, Rui & Fisman, Raymond & Wang, Yongxiang & Xu, Nianhang, 2021. "Air pollution, affect, and forecasting bias: Evidence from Chinese financial analysts," Journal of Financial Economics, Elsevier, vol. 139(3), pages 971-984.
    3. Magali Delmas & Michael W. Toffel, 2004. "Stakeholders and environmental management practices: an institutional framework," Business Strategy and the Environment, Wiley Blackwell, vol. 13(4), pages 209-222, July.
    4. James T. Hamilton, 1993. "Politics and Social Costs: Estimating the Impact of Collective Action on Hazardous Waste Facilities," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 101-125, Spring.
    5. Koichiro Ito & Shuang Zhang, 2020. "Willingness to Pay for Clean Air: Evidence from Air Purifier Markets in China," Journal of Political Economy, University of Chicago Press, vol. 128(5), pages 1627-1672.
    6. Judith L. Walls & Pascual Berrone & Phillip H. Phan, 2012. "Corporate governance and environmental performance: is there really a link?," Strategic Management Journal, Wiley Blackwell, vol. 33(8), pages 885-913, August.
    7. Beland, Louis-Philippe & Oloomi, Sara, 2019. "Environmental disaster, pollution and infant health: Evidence from the Deepwater Horizon oil spill," Journal of Environmental Economics and Management, Elsevier, vol. 98(C).
    8. Darwin Choi & Zhenyu Gao & Wenxi Jiang, 2020. "Attention to Global Warming," The Review of Financial Studies, Society for Financial Studies, vol. 33(3), pages 1112-1145.
    9. Liu, Xiaojuan & Chen, Xiaoyijing & Deng, Baijun, 2023. "The effect of the government's green grip: Evidence from government-initiated corporate environmental ratings and corporate debt financing," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    10. Henriques, Irene & Sadorsky, Perry, 1996. "The Determinants of an Environmentally Responsive Firm: An Empirical Approach," Journal of Environmental Economics and Management, Elsevier, vol. 30(3), pages 381-395, May.
    11. Blundell, Wesley, 2020. "When threats become credible: A natural experiment of environmental enforcement from Florida," Journal of Environmental Economics and Management, Elsevier, vol. 101(C).
    12. Tracy Yue Wang & Andrew Winton & Xiaoyun Yu, 2010. "Corporate Fraud and Business Conditions: Evidence from IPOs," Journal of Finance, American Finance Association, vol. 65(6), pages 2255-2292, December.
    13. Incheol Kim & Hong Wan & Bin Wang & Tina Yang, 2019. "Institutional Investors and Corporate Environmental, Social, and Governance Policies: Evidence from Toxics Release Data," Management Science, INFORMS, vol. 65(10), pages 4901-4926, October.
    14. Zhang, Hao & Tao, Lunchen & Yang, Biyun & Bian, Wenlong, 2023. "The relationship between public participation in environmental governance and corporations’ environmental violations," Finance Research Letters, Elsevier, vol. 53(C).
    15. David Anthoff & Robert Hahn, 2010. "Government failure and market failure: on the inefficiency of environmental and energy policy," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 26(2), pages 197-224, Summer.
    16. Liu, Zheng & Shen, Hongtao & Welker, Michael & Zhang, Ning & Zhao, Yang, 2021. "Gone with the wind: An externality of earnings pressure," Journal of Accounting and Economics, Elsevier, vol. 72(1).
    17. Liu, Chelsea, 2018. "Are women greener? Corporate gender diversity and environmental violations," Journal of Corporate Finance, Elsevier, vol. 52(C), pages 118-142.
    18. Hua Wang & Wenhua Di, 2002. "The determinants of Government environmental performance - an empirical analysis of Chinese townships," Policy Research Working Paper Series 2937, The World Bank.
    19. Sophie A Shive & Margaret M Forster & Jose Scheinkman, 2020. "Corporate Governance and Pollution Externalities of Public and Private Firms," The Review of Financial Studies, Society for Financial Studies, vol. 33(3), pages 1296-1330.
    20. Christopher Marquis & Yanhua Bird, 2018. "The Paradox of Responsive Authoritarianism: How Civic Activism Spurs Environmental Penalties in China," Organization Science, INFORMS, vol. 29(5), pages 948-968, October.
    21. David M. Konisky, 2009. "Inequities in enforcement? Environmental justice and government performance," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 28(1), pages 102-121.
    22. Sanjay Sharma & Irene Henriques, 2005. "Stakeholder influences on sustainability practices in the Canadian forest products industry," Strategic Management Journal, Wiley Blackwell, vol. 26(2), pages 159-180, February.
    23. Bernstein, Asaf & Gustafson, Matthew T. & Lewis, Ryan, 2019. "Disaster on the horizon: The price effect of sea level rise," Journal of Financial Economics, Elsevier, vol. 134(2), pages 253-272.
    24. Tracy Yue Wang, 2013. "Corporate Securities Fraud: Insights from a New Empirical Framework," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(3), pages 535-568, June.
    25. Poirier, Dale J., 1980. "Partial observability in bivariate probit models," Journal of Econometrics, Elsevier, vol. 12(2), pages 209-217, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ashrafee Hossain & Samir Saadi & Abu S. Amin, 2023. "Does CEO Risk-Aversion Affect Carbon Emission?," Journal of Business Ethics, Springer, vol. 182(4), pages 1171-1198, February.
    2. Patricia Kanashiro, 2020. "Can environmental governance lower toxic emissions? A panel study of U.S. high‐polluting industries," Business Strategy and the Environment, Wiley Blackwell, vol. 29(4), pages 1634-1646, May.
    3. Yankun Zhou & Le Luo & Hongtao Shen, 2022. "Community pressure, regulatory pressure and corporate environmental performance," Australian Journal of Management, Australian School of Business, vol. 47(2), pages 368-392, May.
    4. Dong, Jinting & Yu, Lianchao, 2024. "Impact of CEO foreign experience on corporate environmental violations: The role of enhanced environmental ethics and general competency," Economic Modelling, Elsevier, vol. 141(C).
    5. Xiao, Gang & Shen, Sichen, 2022. "To pollute or not to pollute: Political connections and corporate environmental performance," Journal of Corporate Finance, Elsevier, vol. 74(C).
    6. Wang, Tracy Yue & Winton, Andrew, 2021. "Industry informational interactions and corporate fraud," Journal of Corporate Finance, Elsevier, vol. 69(C).
    7. Thanh D. Huynh & Ying Xia, 2023. "Panic Selling When Disaster Strikes: Evidence in the Bond and Stock Markets," Management Science, INFORMS, vol. 69(12), pages 7448-7467, December.
    8. Kempf, Elisabeth & Spalt, Oliver G., 2020. "Attracting the Sharks: Corporate Innovation and Securities Class Action Lawsuits," CEPR Discussion Papers 14358, Centre for Economic Policy Research.
    9. Jian Zhang, 2018. "Public Governance and Corporate Fraud: Evidence from the Recent Anti-corruption Campaign in China," Journal of Business Ethics, Springer, vol. 148(2), pages 375-396, March.
    10. Lixiang Wang & Weian Li & Lujun Qi, 2020. "Stakeholder Pressures and Corporate Environmental Strategies: A Meta-Analysis," Sustainability, MDPI, vol. 12(3), pages 1-16, February.
    11. Daewoung Choi & Yong Kyu Gam & Hojong Shin, 2023. "Environmental reputation and bank liquidity: Evidence from climate transition," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 50(7-8), pages 1274-1304, July.
    12. Lyton Chithambo & Venancio Tauringana & Ishmael Tingbani & Laura Achiro, 2022. "Stakeholder pressure and greenhouses gas voluntary disclosures," Business Strategy and the Environment, Wiley Blackwell, vol. 31(1), pages 159-172, January.
    13. Kuang, Yu Flora & Lee, Gladys, 2017. "Corporate fraud and external social connectedness of independent directors," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 401-427.
    14. Qi Guoyou & Zeng Saixing & Tam Chiming & Yin Haitao & Zou Hailiang, 2013. "Stakeholders' Influences on Corporate Green Innovation Strategy: A Case Study of Manufacturing Firms in China," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 20(1), pages 1-14, January.
    15. Marco Guerci & Annachiara Longoni & Davide Luzzini, 2016. "Translating stakeholder pressures into environmental performance – the mediating role of green HRM practices," Post-Print hal-01251759, HAL.
    16. Muchenje, Linda Tinofirei, 2025. "Stock liquidity and corporate climate performance: evidence from China," Journal of Financial Stability, Elsevier, vol. 77(C).
    17. Ruxi Wang & Frank Wijen & Pursey P.M.A.R. Heugens, 2018. "Government's green grip: Multifaceted state influence on corporate environmental actions in China," Strategic Management Journal, Wiley Blackwell, vol. 39(2), pages 403-428, February.
    18. Natalia Ortiz‐de‐Mandojana & Juan Alberto Aragon‐Correa, 2015. "Boards and Sustainability: the Contingent Influence of Director Interlocks on Corporate Environmental Performance," Business Strategy and the Environment, Wiley Blackwell, vol. 24(6), pages 499-517, September.
    19. Wei Zhang & Xinyu Li & Guanying Wang & Xiangqian Li, 2026. "Environmental pollution and IPO pricing efficiency: evidence from heavily polluting firms in China," Review of Quantitative Finance and Accounting, Springer, vol. 66(2), pages 757-798, February.
    20. Kakuho Furukawa & Hibiki Ichiue & Noriyuki Shiraki, 2025. "How Does Climate Change Interact with the Financial System?," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 43, pages 61-94, November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:finrev:v:61:y:2026:i:1:p:93-120. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/efaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.