Environmental Disclosure Behavior and Capital Market Reaction to Disastrous Environmental Accidents: An Empirical Test of Legitimacy Theory in China

摘要

Corporate environmental disclosure in annual report might influence the assessment of capital market participants on a firm' earnings and cash flows. This study examines disastrous environmental accidents' impacts on the share price and environmental disclosure behavior of intra-industry companies. Our empirical evidences indicate that, following four of the accidents, the CAR of sample firms are significantly negative, and sample firms provided significantly more environmental disclosure in their current and next annual reports than they did two years prior to the accident occurrence. However, we do not find that the CAR is significantly associated with the environmental disclosure of preceding two years. Therefore, the capital market negatively reacts to the threats to companies' legitimacy and exposure to future more regulatory costs, corporate environmental disclosures are largely explained as self-interest behavior legitimizing their ongoing existence and responses to public pressure.