logo
Journal Screenshot

International Journal of Academic Research in Economics and Management Sciences

Open Access Journal

ISSN: 2226-3624

Journal Main Indexing Archives

The Influence of Firm Size and Institutional Environment on ESG Disclosure - Evidence from Listed Companies in China

Yixi Zhang, Cheang Peck Yeng Sharon

http://dx.doi.org/10.6007/IJAREMS/v12-i2/16284

Open access

Abstract References Citation Copyright Full PDF

Environmental, social and governance (ESG) engagement of firms has drawn considerable interest from policymakers and investors. This paper aims to investigate the impact of firm size and institutional environment on the ESG disclosure among listed companies in China. Form the years 2011 to 2021, this study examined a dataset for 11316 firm-year observations of A-share public firms in China. Multiple regression analysis is used to test the research hypotheses. Although according to the Hausman test results (p-value of. 7961), the random effect model is more suitable for this study, the regression results of the three models (ordinary least squares regression, random effect, fixed effect) are relatively consistent. Our findings demonstrate the larger the firm size, the higher the level of ESG disclosure. In addition, our empirical evidences show that the firms have a greater level of ESG disclosure in a better institutional environment. Importantly, our empirical evidences illustrate institutional environment has a moderating effect, strengthening the relationship between firm size and ESG disclosure. This study suggests that a favourable institutional environment should be created to encourage large companies to play the role of industry demonstration and normative effect to improve the level of ESG disclosure. Such evidence can also be used for reference in other emerging markets. Future research could explore the impact of firm profitability, property rights nature, and industry characteristics on ESG practices in different institutional Settings.

Abdi, Y., Li, X., & Càmara-Turull, X. (2022). Exploring the impact of sustainability (ESG) disclosure on firm value and financial performance (FP) in airline industry: the moderating role of size and age. Environment, Development and Sustainability, 24(4), 5052-5079. https://doi.org/10.1007/s10668-021-01649-w.
D'Amato, A., & Falivena, C. (2020). Corporate social responsibility and firm value: Do firm size and age matter? Empirical evidence from European listed companies. Corporate Social Responsibility and Environmental Management, 27(2), 909-924. https://doi.org/10.1002/csr.1855.
Aranguren Gomez, N. (2016). Social and environmental information: an analysis of the reporting patterns of European quoted companies from neo-institutional theory. Spanish Journal of Finance and Accounting-Revista Espanola de Financiacion Y Contabilida, 45(2), 199-230. https://doi.org/10.1080/02102412.2016.1140393.
Bin-feng, C. (2022). Institutional environment, the ultimate controller ’ s characteristics and CSR disclosure in China. Managerial and Decision Economics,43(3),1515–1527. https://doi.org/https://doi.org/10.1002/mde.3471.
Campbell, J. L. (2007). Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility. Academy of Management Review, 32(3), 946–967. https://doi.org/10.5465/AMR.2007.25275684.
Chen, L., Feldmann, A., & Tang, O. (2015). The relationship between disclosures of corporate social performance and financial performance?: Evidences from GRI reports in manufacturing industry. International Journal of Production Economics, 170, 445–456. https://doi.org/10.1016/j.ijpe.2015.04.004.
Chen, S., & Bouvain, P. (2009). Is corporate responsibility converging? a comparison of corporate responsibility reporting in the USA, UK, Australia, and Germany. Journal of Business Ethics, 87, 299–317. https://doi.org/10.1007/s10551-008-9794-0.
Chen, Z., & Xie, G. (2022). ESG disclosure and financial performance: Moderating role of ESG investors. International Review of Financial Analysis, 83, 102291. https://doi.org/10.1016/j.irfa.2022.102291.
Cho, S. J., Chung, C. Y., & Young, J. (2019). Study on the Relationship between CSR and Financial Performance. Sustainability, 11(343), 1–26. https://doi.org/10.3390/su11020343.
Wong, W. C., Batten, J. A., Mohamed-Arshad, S. B., Nordin, S., & Adzis, A. A. (2021). Does ESG certification add firm value?. Finance Research Letters, 39, 101593. https://doi.org/10.1016/j.frl.2020.101593.
Cowen, S. S., Ferreri, L. B., & Parker, L. D. (1987). The impact of corporate characteristics on social responsibility disclosure: A typology and frequency-based analysis. Accounting, Organizations and Society, 12(2), 111-122. https://doi.org/10.1016/0361-3682(87)90001-8.
Drempetic, S., Klein, C., & Zwergel, B. (2020). The influence of firm size on the ESG score: Corporate sustainability ratings under review. Journal of Business Ethics, 167, 333-360. https://doi.org/10.1007/s10551-019-04164-1.
Dupire, M., & M’Zali, B. (2018). CSR Strategies in response to competitive pressures. Journal of Business Ethics, 148(3), 603–623. https://doi.org/10.1007/s10551-015-2981-x.
Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835-2857. https://doi.org/10.1287/mnsc.2014.1984.
Finegold, D., Klossek, A., Nippa, M., & Winkler, A. L. (2010). Explaining firm approaches to corporate social responsibility: institutional environment and firm size. European Journal of International Management, 4(3), 213-233. https://doi.org/10.1504/EJIM.2010.033001.
Galletta, S., Mazzù, S., & Naciti, V. (2022). A bibliometric analysis of ESG performance in the banking industry: From the current status to future directions. Research in International Business and Finance, 62, 101684. https://doi.org/10.1016/j.ribaf.2022.101684.
Gallo, P. J., & Christensen, L. J. (2011). Firm size matters: An empirical investigation of organizational size and ownership on sustainability-related behaviors. Business & Society, 50(2), 315-349. https://doi.org/10.1177/0007650311398784.
Gao-Zeller, X., Li, X., Yang, F., & Zhu, W. (2019). Driving mechanism of CSR strategy in Chinese construction companies based on neo-institutional theory. KSCE Journal of Civil Engineering, 23, 1939-1951. https://doi.org/10.1007/s12205-019-0989-y.
Gholami, A., Murray, P. A., & Sands, J. (2022). Environmental, social, governance & financial performance disclosure for large firms: is this different for SME firms?. Sustainability, 14(10), 6019. https://doi.org/https://doi.org/ 10.3390/su14106019.
Gregory, R. P. (2022). ESG activities and firm cash flow. Global Finance Journal, 52, 100698. https://doi.org/10.1016/j.gfj.2021.100698.
Han, S. R., Li, P., Xiang, J. J., Luo, X. H., & Chen, C. Y. (2022). Does the institutional environment influence corporate social responsibility?? Consideration of green investment of enterprises — evidence from China. Environmental Science and Pollution Research, 29(9), 12722–12739. https://doi.org/https://doi.org/10.1007/s11356-020-09559-6.
Handayati, P., Sumarsono, H., & Narmaditya, B. S. (2022). Corporate Social Responsibility disclosure and Indonesian firm value: The moderating effect of profitability and firm’s size. Journal of Eastern European and Central Asian Research (JEECAR), 9(4), 703-714. https://doi.org/10.15549/jeecar.v9i4.940.
Hasan, M. M., & Habib, A. (2017). Corporate life cycle, organizational financial resources and corporate social responsibility. Journal of Contemporary Accounting & Economics, 13(1), 20-36. https://doi.org/10.1016/j.jcae.2017.01.002.
He, F., Du, H., & Yu, B. (2022). Corporate ESG performance and manager misconduct: Evidence from China. International Review of Financial Analysis, 82, 102201. https://doi.org/10.1016/j.irfa.2022.102201.
Hepburn, C., Qi, Y., Stern, N., Ward, B., Xie, C., & Zenghelis, D. (2021). Towards carbon neutrality and China's 14th Five-Year Plan: Clean energy transition, sustainable urban development, and investment priorities. Environmental Science and Ecotechnology, 8, 100130. https://doi.org/10.1016/j.ese.2021.100130.
Hu, J., Wu, H., & Ying, S. X. (2022). Environmental regulation, market forces, and corporate environmental responsibility: Evidence from the implementation of cleaner production standards in China. Journal of Business Research, 150, 606-622. https://doi.org/10.1016/j.jbusres.2022.06.049.
Iatridis, G. E. (2013). Environmental disclosure quality?: Evidence on environmental performance, corporate governance and value relevance. Emerging Markets Review, 14, 55–75. https://doi.org/10.1016/j.ememar.2012.11.003.
Ifada, L. M., Indriastuti, M., Ibrani, E. Y., & Setiawanta, Y. (2021). Environmental performance and environmental disclosure: The role of financial performance. The Journal of Asian Finance, Economics and Business, 8(4), 349-362. https://doi.org/10.13106/jafeb.2021.vol8.no4.0349.
Ioannou, I., & Serafeim, G. (2012). What drives corporate social performance the role of nation-level institutions. Journal of International Business Studies, 43(9), 34–864. https://doi.org/10.1057/jibs.2012.26.
Li, C., Wu, M., Chen, X., & Huang, W. (2022). Environmental, social and governance performance, corporate transparency, and credit rating: Some evidence from Chinese A-share listed companies. Pacific-Basin Finance Journal, 74, 101806. https://doi.org/10.1016/j.pacfin.2022.101806.
Li, D., Zhao, Y., Sun, Y., & Yin, D. (2017). Corporate environmental performance, environmental information disclosure, and financial performance: Evidence from China. Human and Ecological Risk Assessment: An International Journal, 23(2), 323-339. https://doi.org/10.1080/10807039.2016.1247256.
Li, Q., Luo, W., Wang, Y., & Wu, L. (2013). Firm performance, corporate ownership, and corporate social responsibility disclosure in C hina. Business Ethics: A European Review, 22(2), 159-173. https://doi.org/10.1111/beer.12013.
Liao, P. C., Shih, Y. N., Wu, C. L., Zhang, X. L., & Wang, Y. (2018). Does corporate social performance pay back quickly? A longitudinal content analysis on international contractors. Journal of Cleaner Production, 170, 1328-1337. https://doi.org/10.1016/j.jclepro.2017.09.230.
Liu, X., & Anbumozhi, V. (2009). Determinant factors of corporate environmental information disclosure: an empirical study of Chinese listed companies. Journal of Cleaner Production, 17(6), 593-600. https://doi.org/10.1016/j.jclepro.2008.10.001.
Liu, Y., Kim, C. Y., Lee, E. H., & Yoo, J. W. (2022). Relationship between sustainable management activities and financial performance: Mediating effects of non-financial performance and moderating effects of institutional environment. Sustainability, 14(3), 1168. https://doi.org/https://doi.org/10.3390/su14031168.
Lu, Y., & Abeysekera, I. (2014). Stakeholders' power, corporate characteristics, and social and environmental disclosure: evidence from China. Journal of Cleaner Production, 64, 426-436. https://doi.org/10.1016/j.jclepro.2013.10.005.
McBrayer, G. A. (2018). Does persistence explain ESG disclosure decisions?. Corporate Social Responsibility and Environmental Management, 25(6) ,1074–1086. https://doi.org/10.1002/csr.1521.
Mohammad, W. M. W., & Wasiuzzaman, S. (2021). Environmental, Social and Governance (ESG) disclosure, competitive advantage and performance of firms in Malaysia. Cleaner Environmental Systems, 2, 100015. https://doi.org/10.1016/j.cesys.2021.100015.
Paek, S., Xiao, Q., Lee, S., & Song, H. (2013). Does managerial ownership affect different corporate social responsibility dimensions? An empirical examination of US publicly traded hospitality firms. International Journal of Hospitality Management, 34, 423-433. https://doi.org/10.1016/j.ijhm.2012.12.004.
Roberts, R. W. (1992). Determinants of corporate social responsibility disclosure: An application of stakeholder theory. Accounting, Organizations and Society, 17(6), 595–612. https://doi.org/10.1016/0361-3682(92)90015-K.
Schaltegger, S., & Hörisch, J. (2017). In search of the dominant rationale in sustainability management: legitimacy- or profit-seeking. Journal of Business Ethics, 145(2), 259–276. https://doi.org/10.1007/s10551-015-2854-3.
Scott, W. R. (2008) .Approaching adulthood: The maturing of institutional theory. Theory and Society, 37(5), 427–442. https://doi.org/10.1007/s11186-008-9067-z.
Suchman, M. C. (1995). Managing Legitimacy: Strategic and Approaches. Academy of Management Review, 20(3), 571–610. Available at: https://doi.org/https://doi.org/10.2307/258788.
Udayasankar, K. (2008). Corporate social responsibility and firm size. Journal of Business Ethics, 83(2), 167–175. https://doi.org/10.1007/s10551-007-9609-8.
Ullmann, A. A. (1985). Data in search of a theorya critical examination of the relationships among social performance, social disclosure, and economic performance of U.S. firms’, Academy of Management Review, 10(3), 540–557.
Voinea, C. L., Rauf, F., Naveed, K., & Fratostiteanu, C. (2022). The impact of CEO duality and financial performance on CSR disclosure: Empirical evidence from state-owned enterprises in China. Journal of Risk and Financial Management, 15(1), 37. https://doi.org/10.3390/jrfm15010037.
Waddock, S. A., & Graves, S. B. (1997). The corporate social performance–financial performance link. Strategic management journal, 18(4), 303-319. https://doi.org/10.1002/(SICI)1097-0266(199704)18.
Wang, G., Zhang, H., Zeng, S., Meng, X., & Lin, H. (2022). Reporting on sustainable development: Configurational effects of top management team and corporate characteristics on environmental information disclosure. Corporate Social Responsibility and Environmental Management, 30(1), 28-52. Available at: https://doi.org/10.1002/csr.2337.
Wang, Z., & Sarkis, J. (2017). Corporate social responsibility governance, outcomes, and financial performance. Journal of Cleaner Production, 162, 1607-1616. https://doi.org/10.1016/j.jclepro.2017.06.142.
Wu, D., & Memon, H. (2022). Public pressure, environmental policy uncertainty, and enterprises’ environmental information disclosure. Sustainability, 14(12), 6948.
Wu, L., Shao, Z., Yang, C., Ding, T., & Zhang, W. (2020). The impact of CSR and financial distress on financial performance—evidence from Chinese listed companies of the manufacturing industry. Sustainability, 12(17), 6799. https://doi.org/10.3390/SU12176799.
Xu, C. (2011). The fundamental institutions of China's reforms and development. Journal of Economic Literature, 49(4), 1076-1151. https://doi.org/10.1257/jel.49.4.1076.
Zaiane, S., & Ellouze, D. (2022). Corporate social responsibility and firm financial performance: the moderating effects of size and industry sensitivity. Journal of Management and Governance, 1-41. https://doi.org/10.1007/s10997-022-09636-7.
Zhang, J., Wang, K., Zhao, W., Han, Y., & Miao, X. (2022). Corporate social responsibility and carbon emission intensity: is there a marketization threshold effect?. Emerging Markets Finance and Trade, 58(4), 952-964. https://doi.org/10.1080/1540496X.2020.1854219.
Zhang, L., Zhang, X., An, J., Zhang, W., & Yao, J. (2022). Examining the role of stakeholder-oriented corporate governance in achieving sustainable development: evidence from the SME CSR in the context of China. Sustainability, 14(13), 8181. https://doi.org/10.3990/su13148181.
Zhang, Y., Peng, X., Li, Y., & Fu, S. (2022). How geographic diversification affects corporate social responsibility? The moderating effects of ownership and environmental regulation. Environmental Science and Pollution Research, 29(54), 81658-81669. https://doi.org/10.1007/s11356-022-21550-x.
Zhao, X., Flynn, B. B., & Roth, A. V. (2006). Decision sciences research in China: a critical review and research agenda—foundations and overview. Decision Sciences, 37(4), 451-496. https://doi.org/10.1111/j.1540-5414.2006.00135.x.
Zheng, P., & Ren, C. (2019). Voluntary CSR disclosure, institutional environment, and independent audit demand. China Journal of Accounting Research, 12(4), 357-377. https://doi.org/10.1016/j.cjar.2019.10.002.

In-Text Citation: (Yixi & Sharon, 2023)
To Cite this Article: Yixi, Z., & Sharon, C. P. Y. (2023). The Influence of Firm Size and Institutional Environment on ESG Disclosure - Evidence from Listed Companies in China. International Journal of Academic Research in Economics and Management and Sciences, 12(2), 130 – 142.

Further Information
Our Journals
Get intouch with us

2024 © Copyright HRMARS. All rights Reserved.