Peer effect in corporate environmental information disclosure: evidence from listed firms in China

Environmental sustainability requires the joint efforts governments, households, firms and other parties. Firms can contribute to environmental sustainability by reducing emissions, adopting green technologies, and disclosing corporate environmental information. This study explores the peer effect of environmental information disclosure taking a sample of 449 A-share listed firms on the Shanghai and Shenzhen Stock Exchange in China from 2012 to 2020, including 4041 observations, covering a total of 13 categories in 45 industries. This study shows that the focal firm's environmental information disclosure behavior is affected by its peers. This conclusion holds after considering the econometric issue of endogeneity with the two stage least square strategy. It is also robust to alternative robustness checks, such as re-estimating with the spatial Dubin model, re-classifying the peers with the industry category and adding more control variables. The marginal effect of peer small firms' environmental information disclosure is larger than that of peer large firms’, indicating a 'race to the bottom' in imitation of environmental information disclosure. The legitimacy pressure and competition pressure moderate the peer effect of environmental information disclosure. Based on these findings, this study provides several important policy implications. First, policies to strengthen environmental information disclosure should focus more on the industrial level; Second, regulators should pay particular attention to the environmental information disclosure of small firms; Third, strengthening the supervision of environmental information disclosure and improving the level of environmental information disclosure of peers are necessary for firms in heavily polluting industries and highly competitive industries.