Carbon emission disclosures and financial reporting quality: Does ownership structure and economic development matter?

Bilala, Bilala, Tan, Duojiao, Komal, Bushra, Ezeani, Ernest, Usman, Muhammad orcid iconORCID: 0000-0003-1626-8477 and Salem, Rami Ibrahim a orcid iconORCID: 0000-0002-1241-1099 (2022) Carbon emission disclosures and financial reporting quality: Does ownership structure and economic development matter? Environmental Science & Policy, 137 . pp. 109-119. ISSN 14629011

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Official URL: https://doi.org/10.1016/j.envsci.2022.08.004

Abstract

Carbon emission disclosures have lately gained considerable attention from investors, public companies, and regulators due to their adverse impact on global warming. Our study examines the implication of the extent of carbon emission disclosures on financial reporting quality. Using a sample of the Chinese high polluting companies from 2012 to 2018, we found a negative relationship between carbon emission disclosures and discretionary accruals, indicating that companies with more carbon disclosures have better financial reporting quality. In addition, we find that state-owned Chinese companies with more carbon disclosures experienced better financial reporting quality. Furthermore, we find that companies from more developed regions that engage in carbon emission disclosure are also associated with higher financial reporting quality than companies from less developed regions. Our findings are robust using alternative methodologies. Our study has implications for companies' managers since it helps them legitimize their actions to stakeholders by providing carbon emission disclosures and higher financial reporting quality. It will assist the Chinese regulators and policymakers in encouraging high-polluting companies to voluntarily disclose more carbon-related matters for different stakeholders.


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