IDEAS home Printed from https://ideas.repec.org/a/wly/corsem/v26y2019i1p248-256.html
   My bibliography  Save this article

Executives' excess compensation, legitimacy, and environmental information disclosure in Chinese heavily polluting companies: The moderating role of media pressure

Author

Listed:
  • Qiang Li
  • Tian Li
  • Hongtao Chen
  • Erwei Xiang
  • Wenjuan Ruan

Abstract

This study examines whether executives justify their excess compensation through environmental information disclosure using a sample of listed companies in China's heavily polluting industries from 2010 to 2014. We find that executives' excess compensation is positively related to the quality of environmental information disclosure. The above relationship is significant in cases with strong demand for compensation justification (i.e., state‐owned enterprises and firms where an internal compensation gap is salient), indicating that executives manipulate environmental information disclosure about their companies according to their purposes. We also find that media pressure weakens the above relationship. A further test affirms a differential influence of media pressure in settings that involve public or private ownership, development of markets, and low or high product market competition. This study reveals a self‐serving motive of executives for environmental information disclosure. The findings of this study have practical implications for regulators, shareholders, and managers.

Suggested Citation

  • Qiang Li & Tian Li & Hongtao Chen & Erwei Xiang & Wenjuan Ruan, 2019. "Executives' excess compensation, legitimacy, and environmental information disclosure in Chinese heavily polluting companies: The moderating role of media pressure," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(1), pages 248-256, January.
    • Handle: RePEc:wly:corsem:v:26:y:2019:i:1:p:248-256
    DOI: 10.1002/csr.1676
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/csr.1676
    Download Restriction: no
    File URL: https://libkey.io/10.1002/csr.1676?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. Kathy Gibson & Gary O'Donovan, 2007. "Corporate Governance and Environmental Reporting: an Australian study," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(5), pages 944-956, September.
    2. Firth, Michael & Lin, Chen & Liu, Ping & Wong, Sonia M.L., 2009. "Inside the black box: Bank credit allocation in China's private sector," Journal of Banking & Finance, Elsevier, vol. 33(6), pages 1144-1155, June.
    3. Xingqiang Du & Jianying Weng & Quan Zeng & Yingying Chang & Hongmei Pei, 2017. "Do Lenders Applaud Corporate Environmental Performance? Evidence from Chinese Private-Owned Firms," Journal of Business Ethics, Springer, vol. 143(1), pages 179-207, June.
    4. Alexander Dyck & Natalya Volchkova & Luigi Zingales, 2008. "The Corporate Governance Role of the Media: Evidence from Russia," Journal of Finance, American Finance Association, vol. 63(3), pages 1093-1135, June.
    5. Adair Morse & Vikram Nanda & Amit Seru, 2011. "Are Incentive Contracts Rigged by Powerful CEOs?," Journal of Finance, American Finance Association, vol. 66(5), pages 1779-1821, October.
    6. Jennifer Martínez‐Ferrero & Isabel M. Garcia‐Sanchez & Beatriz Cuadrado‐Ballesteros, 2015. "Effect of Financial Reporting Quality on Sustainability Information Disclosure," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 22(1), pages 45-64, January.
    7. Aerts, Walter & Cormier, Denis, 2009. "Media legitimacy and corporate environmental communication," Accounting, Organizations and Society, Elsevier, vol. 34(1), pages 1-27, January.
    8. Albuquerque, Ana M. & De Franco, Gus & Verdi, Rodrigo S., 2013. "Peer choice in CEO compensation," Journal of Financial Economics, Elsevier, vol. 108(1), pages 160-181.
    9. Amemiya, Takeshi, 1973. "Regression Analysis when the Dependent Variable is Truncated Normal," Econometrica, Econometric Society, vol. 41(6), pages 997-1016, November.
    10. Benjamin E. Hermalin & Michael S. Weisbach, 2012. "Information Disclosure and Corporate Governance," Journal of Finance, American Finance Association, vol. 67(1), pages 195-234, February.
    11. Lu, Jun & Shi, Zhen, 2018. "Does improved disclosure lead to higher executive compensation? Evidence from the conversion to IFRS and the dual-class share system in China," Journal of Corporate Finance, Elsevier, vol. 48(C), pages 244-260.
    12. Xu, Nianhang & Li, Xiaorong & Yuan, Qingbo & Chan, Kam C., 2014. "Excess perks and stock price crash risk: Evidence from China," Journal of Corporate Finance, Elsevier, vol. 25(C), pages 419-434.
    13. Core, John E. & Holthausen, Robert W. & Larcker, David F., 1999. "Corporate governance, chief executive officer compensation, and firm performance," Journal of Financial Economics, Elsevier, vol. 51(3), pages 371-406, March.
    14. Doris M. Merkl‐Davies & Niamh M. Brennan & Stuart J. McLeay, 2011. "Impression management and retrospective sense‐making in corporate narratives," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 24(3), pages 315-344, March.
    15. Scott J. Callan & Janet M. Thomas, 2014. "Relating CEO Compensation to Social Performance and Financial Performance: Does the Measure of Compensation Matter?," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 21(4), pages 202-227, July.
    16. Zyglidopoulos, Stelios C. & Georgiadis, Andreas P. & Carroll, Craig E. & Siegel, Donald S., 2012. "Does media attention drive corporate social responsibility?," Journal of Business Research, Elsevier, vol. 65(11), pages 1622-1627.
    17. Xingqiang Du & Wei Jian & Quan Zeng & Yingjie Du, 2014. "Corporate Environmental Responsibility in Polluting Industries: Does Religion Matter?," Journal of Business Ethics, Springer, vol. 124(3), pages 485-507, October.
    18. Liu, Baixiao & McConnell, John J. & Xu, Wei, 2017. "The power of the pen reconsidered: The media, CEO human capital, and corporate governance," Journal of Banking & Finance, Elsevier, vol. 76(C), pages 175-188.
    19. Lopin Kuo & Chin‐Chen Yeh & Hui‐Cheng Yu, 2012. "Disclosure of Corporate Social Responsibility and Environmental Management: Evidence from China," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 19(5), pages 273-287, September.
    20. Core, John E. & Guay, Wayne & Larcker, David F., 2008. "The power of the pen and executive compensation," Journal of Financial Economics, Elsevier, vol. 88(1), pages 1-25, April.
    21. X. Meng & S. Zeng & C. Tam & X. Xu, 2013. "Whether Top Executives’ Turnover Influences Environmental Responsibility: From the Perspective of Environmental Information Disclosure," Journal of Business Ethics, Springer, vol. 114(2), pages 341-353, May.
    22. Doris M. Merkl-Davies & Niamh Brennan & Stuart McLeay, 2011. "Impression management and retrospective sense-making in corporate narratives : a social psychology perspective," Open Access publications 10197/2900, Research Repository, University College Dublin.
    23. Xavier Giroud & Holger M. Mueller, 2011. "Corporate Governance, Product Market Competition, and Equity Prices," Journal of Finance, American Finance Association, vol. 66(2), pages 563-600, April.
    24. de Villiers, Charl & van Staden, Chris J., 2006. "Can less environmental disclosure have a legitimising effect? Evidence from Africa," Accounting, Organizations and Society, Elsevier, vol. 31(8), pages 763-781, November.
    25. Liu, Xiaohui & Lu, Jiangyong & Chizema, Amon, 2014. "Top executive compensation, regional institutions and Chinese OFDI," Journal of World Business, Elsevier, vol. 49(1), pages 143-155.
    26. Chen, Jing & Ezzamel, Mahmoud & Cai, Ziming, 2011. "Managerial power theory, tournament theory, and executive pay in China," Journal of Corporate Finance, Elsevier, vol. 17(4), pages 1176-1199, September.
    27. Clarkson, Peter M. & Li, Yue & Richardson, Gordon D. & Vasvari, Florin P., 2008. "Revisiting the relation between environmental performance and environmental disclosure: An empirical analysis," Accounting, Organizations and Society, Elsevier, vol. 33(4-5), pages 303-327.
    28. Zhang, Cui, 2017. "Political connections and corporate environmental responsibility: Adopting or escaping?," Energy Economics, Elsevier, vol. 68(C), pages 539-547.
    29. Chen, Yi-Chun & Hung, Mingyi & Wang, Yongxiang, 2018. "The effect of mandatory CSR disclosure on firm profitability and social externalities: Evidence from China," Journal of Accounting and Economics, Elsevier, vol. 65(1), pages 169-190.
    30. Baolei Qi & Rong Yang & Gaoliang Tian, 2014. "Can media deter management from manipulating earnings? Evidence from China," Review of Quantitative Finance and Accounting, Springer, vol. 42(3), pages 571-597, April.
    31. Cheng-Li Huang & Fan-Hua Kung, 2010. "Drivers of Environmental Disclosure and Stakeholder Expectation: Evidence from Taiwan," Journal of Business Ethics, Springer, vol. 96(3), pages 435-451, October.
    32. Faulkender, Michael & Yang, Jun, 2010. "Inside the black box: The role and composition of compensation peer groups," Journal of Financial Economics, Elsevier, vol. 96(2), pages 257-270, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ali Meftah Gerged & Eshani S. Beddewela & Christopher J. Cowton, 2023. "Does the quality of country‐level governance have an impact on corporate environmental disclosure? Evidence from Gulf Cooperation Council countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1179-1200, April.
    2. Wang, Liukai & Li, Min & Wang, Weiqing & Gong, Yu & Xiong, Yu, 2023. "Green innovation output in the supply chain network with environmental information disclosure: An empirical analysis of Chinese listed firms," International Journal of Production Economics, Elsevier, vol. 256(C).
    3. Li, Qiang & Wang, Shengying & He, Zichun & Li, Hanqiao & Xiang, Erwei, 2023. "Does stock market index adjustment affect environmental information disclosure? Evidence from China," International Review of Financial Analysis, Elsevier, vol. 87(C).
    4. Yi Yang & Congxu Yao & Ying Li, 2020. "The impact of the amount of environmental information disclosure on financial performance: The moderating effect of corporate internationalization," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(6), pages 2893-2907, November.
    5. Liang, Ting & Zhang, Yue-Jun & Qiang, Wei, 2022. "Does technological innovation benefit energy firms’ environmental performance? The moderating effect of government subsidies and media coverage," Technological Forecasting and Social Change, Elsevier, vol. 180(C).
    6. Wei Wang & Ziyuan Sun & Weixing Zhu & Lin Ma & Yuting Dong & Xiao Sun & Fengzhi Wu, 2023. "How does multi‐agent govern corporate greenwashing? A stakeholder engagement perspective from “common” to “collaborative” governance," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(1), pages 291-307, January.
    7. Xiangan Ding & Ying Qu & Mohsin Shahzad, 2019. "The Impact of Environmental Administrative Penalties on the Disclosure of Environmental Information," Sustainability, MDPI, vol. 11(20), pages 1-24, October.
    8. Shao, Hanhua & Wang, Yuansheng & Wang, Yao & Li, Yuanjia, 2022. "Green credit policy and stock price crash risk of heavily polluting enterprises: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 271-287.
    9. Changchun Zhu & Na Li & Jing Ma, 2023. "Environmental backgrounds of CEOs and corporate environmental management information disclosure: The mediating effects of financing constraints and media attention," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(6), pages 2885-2905, November.
    10. Weiwei Wu & Zhou Liang & Qi Zhang, 2020. "Effects of corporate environmental responsibility strength and concern on innovation performance: The moderating role of firm visibility," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(3), pages 1487-1497, May.
    11. Hamzeh Al Amosh & Saleh F. A. Khatib, 2021. "Corporate governance and voluntary disclosure of sustainability performance: the case of Jordan," SN Business & Economics, Springer, vol. 1(12), pages 1-22, December.
    12. Lujun Qi & Lixiang Wang & Wei'an Li, 2020. "Do mutual fund networks affect corporate social responsibility? Evidence from China," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(2), pages 1040-1050, March.
    13. Tang, Pengcheng & Yang, Shuxiang & Yang, Shuwang, 2020. "How to design corporate governance structures to enhance corporate social responsibility in China's mining state-owned enterprises?," Resources Policy, Elsevier, vol. 66(C).
    14. Yuan Ma & Qiang Zhang & Qiyue Yin & Bingcheng Wang, 2019. "The Influence of Top Managers on Environmental Information Disclosure: The Moderating Effect of Company’s Environmental Performance," IJERPH, MDPI, vol. 16(7), pages 1-15, April.

    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. Yuan Ma & Qiang Zhang & Qiyue Yin & Bingcheng Wang, 2019. "The Influence of Top Managers on Environmental Information Disclosure: The Moderating Effect of Company’s Environmental Performance," IJERPH, MDPI, vol. 16(7), pages 1-15, April.
    2. Chen, Hongtao & Fang, Xiumei & Xiang, Erwei & Ji, Xiaojia & An, Maolin, 2023. "Do online media and investor attention affect corporate environmental information disclosure？Evidence from Chinese listed companies," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 1022-1040.
    3. Rongbing Huang & Yubo Huang, 2020. "Does Internal Control Contribute to a Firm’s Green Information Disclosure? Evidence from China," Sustainability, MDPI, vol. 12(8), pages 1-23, April.
    4. Linyan Fan & Sheng Yao, 2022. "Analyst Site Visits and Corporate Environmental Information Disclosure: Evidence from China," IJERPH, MDPI, vol. 19(23), pages 1-21, December.
    5. Qiang Li & Wenjuan Ruan & Huimin Shi & Erwei Xiang & Feida (Frank) Zhang, 2022. "Corporate environmental information disclosure and bank financing: Moderating effect of formal and informal institutions," Business Strategy and the Environment, Wiley Blackwell, vol. 31(7), pages 2931-2946, November.
    6. Wei Li & Weining Li & Veikko Seppänen & Timo Koivumäki, 2023. "Effects of greenwashing on financial performance: Moderation through local environmental regulation and media coverage," Business Strategy and the Environment, Wiley Blackwell, vol. 32(1), pages 820-841, January.
    7. Gipper, Brandon, 2021. "The economic effects of expanded compensation disclosures," Journal of Accounting and Economics, Elsevier, vol. 71(1).
    8. Zhang, Ziqi & Su, Zhi & Wang, Ke & Zhang, Yongji, 2022. "Corporate environmental information disclosure and stock price crash risk: Evidence from Chinese listed heavily polluting companies," Energy Economics, Elsevier, vol. 112(C).
    9. Zhaojun Yang & Weihao Liu & Jun Sun & Yali Zhang, 2017. "Corporate Environmental Responsibility and Environmental Non-Governmental Organizations in China," Sustainability, MDPI, vol. 9(10), pages 1-12, September.
    10. Karen Moris, 2014. "The Media Influency On The Corporate Governance Practices [L'Influence Des Medias Sur Les Pratiques De Gouvernance D'Entreprise]," Post-Print hal-01899412, HAL.
    11. Francis, Bill & Hasan, Iftekhar & Mani, Sureshbabu & Ye, Pengfei, 2016. "Relative peer quality and firm performance," Journal of Financial Economics, Elsevier, vol. 122(1), pages 196-219.
    12. Hans B. Christensen & Luzi Hail & Christian Leuz, 2021. "Mandatory CSR and sustainability reporting: economic analysis and literature review," Review of Accounting Studies, Springer, vol. 26(3), pages 1176-1248, September.
    13. Shahab, Yasir & Ntim, Collins G. & Ullah, Farid & Yugang, Chen & Ye, Zhiwei, 2020. "CEO power and stock price crash risk in China: Do female directors' critical mass and ownership structure matter?," International Review of Financial Analysis, Elsevier, vol. 68(C).
    14. Tiffany Cheng-Han Leung & Robin Stanley Snell, 2021. "Strategies for Social and Environmental Disclosure: The Case of Multinational Gambling Companies," Journal of Business Ethics, Springer, vol. 168(3), pages 447-467, January.
    15. Yanhong Tang & Xin Miao & Hongyu Zang & Yanhong Gao, 2018. "Information Disclosure on Hazards from Industrial Water Pollution Incidents: Latent Resistance and Countermeasures in China," Sustainability, MDPI, vol. 10(5), pages 1-15, May.
    16. Martina Nannelli & Stefania Oliva, 2021. "The rise of the sharing economy and its relationship with sustainable development. A critical literature review," Working Papers - Business wp2021_03.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    17. Shan Xu & Duchi Liu, 2018. "Do Financial Markets Care about Corporate Social Responsibility Disclosure? Further Evidence from China," Australian Accounting Review, CPA Australia, vol. 28(1), pages 79-103, March.
    18. X. Meng & S. Zeng & C. Tam & X. Xu, 2013. "Whether Top Executives’ Turnover Influences Environmental Responsibility: From the Perspective of Environmental Information Disclosure," Journal of Business Ethics, Springer, vol. 114(2), pages 341-353, May.
    19. Denis Cormier & Michel Magnan, 2015. "The Economic Relevance of Environmental Disclosure and its Impact on Corporate Legitimacy: An Empirical Investigation," Business Strategy and the Environment, Wiley Blackwell, vol. 24(6), pages 431-450, September.
    20. Mohamed Chelli & Sylvain Durocher & Anne Fortin, 2018. "Normativity in Environmental Reporting: A Comparison of Three Regimes," Journal of Business Ethics, Springer, vol. 149(2), pages 285-311, May.

    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:wly:corsem:v:26:y:2019:i:1:p:248-256. 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://doi.org/10.1002/(ISSN)1535-3966 .

    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.