Do auditors respond to stringent environmental regulation? Evidence from China’s new environmental protection law

Liu, Xinghe; Xu, Huifeng; Lu, Meiting

doi:10.1016/j.econmod.2020.12.029

Cited by 38 publications

(23 citation statements)

References 59 publications

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“…For an average firm in our sample, the firm size is 22.060. The summary results of the other controls broadly align with previous studies (e.g., Cai et al, 2021;Liu X. et al, 2021).…”

Section: Descriptive Statisticssupporting

confidence: 87%

“…Stringent environmental regulation induced by the new EPL increases the possibility of heavy-polluting firms being suspended or even forced to close when they fail to comply with environmental protection laws and regulations. This not only increases the uncertainty of heavy-polluting firms' production and operation (Liu et al, 2018) but also enhances the heavy-polluting firms' legal risks of pollutants with more potential lawsuits (Falk and Wee, 2015;Liu X. et al, 2021), thereby causing firms to reserve more cash to prevent and resist external liquidity risk timely and effectively in uncertain times (Han and Qiu, 2007). On the other hand, heightened uncertainty increases financial constraints, thereby, forcing firms to hoard cash to buffer them against contingencies (Campello et al, 2010).…”

Section: Hypothesis Developmentmentioning

confidence: 99%

“…The environment is ever-changing, uncertain, and unpredictable (Sharma et al, 2021a). Stringent environment regulation induces heightened environmental uncertainty (Lanoie et al, 2008) by enhancing the heavypolluting firms' environmental risks (Falk and Wee, 2015;Liu X. et al, 2021), making debt financing more difficult and costly (Caragnano et al, 2020;Pizzutilo et al, 2020;Ding et al, 2021). In addition, to achieve the social goal of sustainable development, non-heavy-polluting industries such as new energy industries, typically receive more subsidies (Qiao and Fei, 2022).…”

Section: Introductionmentioning

confidence: 99%

“…Further, we explore the internal mechanisms of the regulatory effect on corporate cash holdings, providing supportive evidence for the precautionary motive. Third, our paper is related to a growing number of studies that take advantage of the new EPL amended and officially passed in April 2014 in China to investigate and understand the impact of environmental regulation on green innovation (Liu Y. et al, 2021), total factor productivity (Cai and Ye, 2020), and audit prices (Liu X. et al, 2021).…”

Section: Introductionmentioning

confidence: 99%

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Environmental Regulation and Corporate Cash Holdings: Evidence From China’s New Environmental Protection Law

Zhang

Cheng

2022

Front. Environ. Sci.

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Exploiting the 2014 Environmental Protection Law (EPL) in China as quasi-natural experiments, we adopt a difference-in-differences approach to examine the impact of environmental regulation on corporate cash holdings. We document that heavy-polluting firms increase their cash holdings 15% more than non-heavy-polluting firms due to stringent environmental regulation. Further tests show that the heightened environmental uncertainty, the limited access to bank loans, and the decline in obtaining government subsidies for heavy-polluting firms are three plausible channels that allow environmental regulation to increase corporate cash holdings. The effects of environmental regulation on cash holdings are stronger for firms without political backgrounds and those in regions with less dependent on the secondary sector. Overall, our results offer original evidence showing how environmental regulation in emerging economies affects firms’ liquidity management decisions and support the precautionary effect of cash holdings.

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“…For an average firm in our sample, the firm size is 22.060. The summary results of the other controls broadly align with previous studies (e.g., Cai et al, 2021;Liu X. et al, 2021).…”

Section: Descriptive Statisticssupporting

confidence: 87%

Section: Hypothesis Developmentmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Environmental Regulation and Corporate Cash Holdings: Evidence From China’s New Environmental Protection Law

Zhang

Cheng

2022

Front. Environ. Sci.

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“…We find that the relationship between board centrality and CSR decoupling endures significant changes because of the adoption of the 2015 new environment law. The findings add to the previous studies on Chinese CSR regulation policies ( Zhang et al, 2017 ; Liu et al, 2020 ; Yu et al, 2021 ).…”

Section: Introductionsupporting

confidence: 79%

Board Network and CSR Decoupling: Evidence From China

et al. 2022

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This paper investigates the influence of board network centrality on corporate social responsibility (CSR) decoupling. CSR decoupling refers to the gap between corporate internal and external actions in CSR practices. Specifically, we measure CSR decoupling as the difference between corporate social disclosure (CSD) and corporate social performance (CSP). This paper uses a sample of Chinese A-share listed firms during 2009–2018, takes the technical dimension score (T-score) and content dimension score (C-score) of RKS ratings as proxies of CSD and CSP, and obtains CSR decoupling as the difference between CSD and CSP. Our results show that (1) board network centrality is positively related to over-decoupling in the pre-adoption period (2009–2014) of the new environmental law but negatively related to over-decoupling in the post-adoption period (2015–2018) and (2) centrality is not related to under-decoupling in the pre-adoption period but a significantly positive related in the post-adoption period. Our finding reveals a complex role of the board network in CSR practices in China.

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Board competence and green innovation—Does external governance matter?

Yousaf,

Tauni,

Yousaf

et al. 2023

Bus Strat Env

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Previous research examining the link between board attributes and ecological strategies such as green innovation has primarily focused on structural board attributes, yielding mixed findings. Moreover, the critical contextual grounds that shape the relationship between board attributes and green innovation have often been overlooked, leading to potential biases in empirical investigations. Considering that competence drives outstanding performance, we developed a unique measure of board competence that represents the board's intrinsic ability to perform in corporate strategies. Drawing on a holistic perspective of agency, resource dependence, and stakeholder theories, we posit a strong relationship between board competence and green innovation. Furthermore, we contend that this association is moderated by external governance mechanisms, namely audit quality, media coverage, and imitative pressure. Through our analysis of publicly traded Chinese companies, we found compelling evidence to support our assertions. These findings have important implications for policymakers, practitioners, and managers.

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Do auditors respond to stringent environmental regulation? Evidence from China’s new environmental protection law

Cited by 38 publications

References 59 publications

Environmental Regulation and Corporate Cash Holdings: Evidence From China’s New Environmental Protection Law

Environmental Regulation and Corporate Cash Holdings: Evidence From China’s New Environmental Protection Law

Board Network and CSR Decoupling: Evidence From China

Board competence and green innovation—Does external governance matter?

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