Impact of executive pay gap on environmental, social, and governance disclosure in China: Is there a strategic choice?

Abstract

This study investigates the mechanisms through which the executive pay gap affects the disclosure of environmental, social, and governance (ESG) information. Utilizing panel data from China's A‐share listed firms between 2012 and 2020, our findings reveal a significant positive correlation between the executive pay gap and ESG disclosure, with real earnings management playing a partial mediating role. Notably, the impact of the executive pay gap on ESG disclosure is more pronounced in voluntary disclosure firms and those with low internal control levels, as compared to mandatory disclosure firms and those with high internal control levels. This study provides international evidence for the strategic disclosure behavior of ESG information and the necessity of ESG disclosure regulation.

Can energy internet improve corporate ESG performance? -- Evidence from Chinese high energy-consuming companies

“…On the negative side, this paper selects real earnings management as an indicator to reflect whether a company has impression management motivation. Zhang et al argue that if a company's true earnings management declines significantly, the company may be able to maintain a positive corporate image by increasing ESG disclosure [ [ 57 ]]. Conversely, this paper argues that if the true earnings management of a company does not significantly decrease, there is no motivation for the company to use ESG information disclosure for impression management.…”

Theories underlying environmental, social and governance (ESG) disclosure: a systematic review of accounting studies

“…Internal dynamics and factors also matter to ESG/CSR disclosure practices (e.g., Campopiano and De Massis, 2015;Baldini et al, 2018;Aureli et al, 2020; After stakeholder, legitimacy, and institutional theories, agency theory is the most widely used among the 142 sample articles. It is used both alone (10 articles, e.g., Suttipun, 2021) and combined with other theories (19 articles), for example, with stakeholder and institutional theories (Zhang et al, 2023). Agency theory examines the relationship between the management/executives (agents) and corporate owners/shareholders (principals) or investors of an organization.…”

A Review of Corporate Social Responsibility Decoupling and Its Impact: Evidence from China

“…Elevating executives' salaries within appropriate limits and expanding the compensation gap reasonably can enhance the motivation of the senior management team, consequently boosting the company's performance. Using panel data from China's A-share listed companies from 2012 to 2020, Zhang et al's analysis unveils a substantial positive relationship between the reasonable executive pay gap and social disclosure [76]. Particularly noteworthy is that this influence of the executive pay gap on social disclosure is more noticeable in firms that voluntarily disclose information compared to firms with mandatory disclosure requirements.…”