The establishment of environmental courts “significantly promotes” companies’ climate-related risk disclosures, according to an academic study published in the Humanities and Social Sciences Communications journal.
Researchers Zhang Bokai (Guizhou Open University), Huang Chengjie (Northern University of Malaysia) and Xiao Qiang (Guizhou Jinyuan Group) assessed a sample of Chinese listed companies’ disclosures between 2012 and 2022, with data compared before and after the establishment of climate courts in different regions.
The analysis reads: “Environmental courts can attract long-term institutional investors, thereby enhancing external supervision and governance, which in turn promotes climate risk disclosure. However, this effect is weakened when managerial ownership is relatively high.
“Furthermore, a substitutive relationship exists between environmental courts and corporate social reputation: the positive effect of environmental courts on disclosure is less pronounced for firms with stronger reputations,” it continues. “Finally, heterogeneity analyses indicate that this effect is more pronounced among firms with lower accounting information quality, weaker financing constraints, and a lower proportion of female executives.”
(Note: the manuscript provided is an unedited version to provide early access to the findings)