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The role of audit committees in social responsibility and environmental disclosures: evidence from Chinese energy sector

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Abstract

This study investigates the role of Chinese audit committees in social responsibility and environmental disclosures. We examine whether audit committee characteristics are related to the disclosures. By using a balanced panel dataset of Chinese energy firms and firm fixed-effects regressions, we find that audit committees’ female representation is positively associated with the likelihood of issuing social responsibility reports and the level of environmental disclosures. Nevertheless, there is no consistent evidence that some conventional measures of audit committee effectiveness including audit committee independence and financial expertise can positively affect the disclosures. The findings suggest that female audit committee members are more effective in enhancing the disclosures than their male counterparts, which may pose a demand for the presence of more female directors on Chinese audit committees. Meanwhile, there is room for Chinese audit committee members to extend their oversight role. This study enriches the research on the role of audit committees in social responsibility and environmental disclosures, which has been little addressed in the literature.

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Notes

  1. The GDP growth data can be found from https://www.macrotrends.net/countries/CHN/china/gdp-growth-rate.

  2. The pollution data can be found from https://www.who.int/airpollution/data/cities/en/.

  3. See https://www.nytimes.com/2018/03/12/upshot/china-pollution-environment-longer-lives.html.

  4. These items are detailed in “Research design” section.

  5. We discuss these studies in “Hypotheses development” section to further explain why the eight audit committee characteristics are chosen.

  6. http://www.gov.cn/guoqing/2012-04/10/content_2584066.htm.

  7. ‘Three Simultaneity’ rule requires that the main project and its environmental protection facilities should be designed, constructed, and brought into operation simultaneously.

  8. We use the United Nations’ latest classification of developed or developing countries (https://www.un.org/development/desa/dpad/wp-content/uploads/sites/45/WESP2020_Annex.pdf).

  9. Sustainability reports include information on social, ethical and environmental performance.

  10. Integrated reports include sustainability reporting.

  11. The Carbon Disclosure Project refers to a non-profit organization which supports the disclosure of the environmental impact of major corporations.

  12. We acknowledge the trade-off between internal and external validity.

  13. RESSET is the full English name of the company providing the database.

  14. The Chinese stock exchanges designate a listed firm as ‘Special Treatment’ if it is continuously in loss and financially distressed, giving rise to a higher risk of delisting.

  15. B shares are quoted in foreign currency and mostly traded by foreign investors.

  16. Refer to footnote 7 for the definition of “Three Simultaneity” rule.

  17. Other environmental issues include environmental protection education and training, environmental protection charity, etc.

  18. The maximum total score is 30 (i.e., 15 × 2).

  19. According to statistics posted by the Chinese government news agency (http://www.xinhuanet.com

    //English/2017–10/27/c_136710572.htm), the percentage of female deputies to the 12th National People’s Congress (China’ top legislature) and the percentage of female member on the board of directors had reached a record high of 23.4% and 39.9% in 2016, respectively.

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Acknowledgements

We thank an anonymous referee for helpful comments and suggestions.

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  1. School of Economics and Management, China University of Petroleum, Qingdao, Shandong, People’s Republic of China

    Junhui Wang

  2. Odette School of Business, University of Windsor, Windsor, ON, Canada

    Jerry Sun

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  1. Junhui Wang
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Wang, J., Sun, J. The role of audit committees in social responsibility and environmental disclosures: evidence from Chinese energy sector. Int J Discl Gov 19, 113–128 (2022). https://doi.org/10.1057/s41310-021-00131-3

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