Environmental Information Disclosure, Legitimacy Pressure, and Green Total Factor Productivity

As a new tool of environmental regulation, environmental information disclosure (EID) and its effect on firm environmental performance are yet to be fully explored in emerging economies. We examine the effects of EID on firm green total factor productivity (TFP) through legitimacy pressure, using China’s heavy polluting firms under government monitoring as the empirical context. The findings show that EID significantly improves firm green TFP, but the positive effect is weakened by firms’ bargaining power against local government in environmental regulation. The positive effects are mainly through intensified government regulation and reputation penalty. The effects of green competition only manifest in consumer product industries but not in industrial product industries. Additional analysis suggests that the positive effects of EID on green TFP are more evident among private firms, in high-tech industries, and in regions with high quality business environments, and the improvement of green TFP is mainly through technology efficiency. This study contributes to the understanding of firm level effects of environmental information disclosure in emerging markets and provides important implications on the improvement of environmental policies.