Introduction
Background
Motivation
Structure and contribution
Literature review
Corporate social responsibility (CSR)
Corporate environmental management
Market value management
Foreign academic advancement
Event study method
Structure environmental information index
Domestic academic advancement
Event study method
Structure environmental information index
Data and methodology
Data collection
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ST companies, for example ST Titanium Dioxide Group (002145.SZ);
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Environmental protection technology companies, for example Fujian Longking Ltd. and Tianli Environmental Technology Ltd. (600,388.SH),
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Listed in China but the environmental violation took place in abroad, for example Chinalco Mining Corporation International (601,311.SH).
Methodology: Event study
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Mean-Adjusted Returns Model
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Market-Adjusted Returns Model
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Capital Asset Pricing Model
Hypothesis and variables
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Hypothesis 1: Chinese shareholders react negatively to the disclosure of environmental violations.
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Hypothesis 2: Shareholders’ negative reaction to the disclosure of environmental violations increases over time.
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Hypothesis 3: Shareholders’ negative reaction to the disclosure of environmental violations is more strongly in the year with higher media environmental attention.
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Hypothesis 4: Shareholders’ negative reaction to the disclosure of environmental violations is stronger for the corporations with a weaker pollution situation prior.
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Hypothesis 5: Shareholders’ negative reaction to the disclosure of environmental violations is stronger for the corporations with weaker CSR performance.
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Stock exchange market
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Industry
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Size
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Ownership intensity
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Return on Equity
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Price-to-earnings
Type | Implication | Signal | Measurement | Expected sign |
---|---|---|---|---|
Explained variable | Cumulated Abnormal Return | CARi | Sum of the abnormal returns in the event window | |
Explanatory Variable -External | Time Trend | Trend | Years since the event | – |
Media Attention | Media-Att | Major media attention on environmental protection. Frequency of the key words: pollution, explosion, oil spilling and waste water | + | |
Explanatory Variable -Internal | Previous Pollution Control | Pre-Pollution | Have(1) or not have (1) environmental violations from 2002 to the event date, dummy variable | – |
Previous CSR Performance | Pre-CSR | Published(1) or not published(0) CSR report in the previous year, dummy variable | + | |
Control Variables | Stock Exchange Market | Market | Shenzhen Stock Exchange(0) or Shanghai Stock Exchange(1), dummy variable | +/− |
Industry | Industry | Ordinary industry(0) or pollution industry(1), dummy variable | – | |
Size | Size | Logarithm of the total asset | + | |
Concentration of Ownership | Ownership | quadratic sum of the shareholding ratio of the top ten major shareholders | + | |
Rate on Equity | ROE | Net profit/Total Equity | + | |
Price to Earnings Ratio | PE | Net profit/Earning per share | + |
Regression analysis
Significance of CAR
Event date | Estimation window | Event window | Average |
P value |
---|---|---|---|---|
event_date_n | (−180,-30) | (−1,1) | −0.903% | 0.041** |
Event date | Estimation window | Event window | Average |
P value |
---|---|---|---|---|
event_date_n | (−180,-30) | (−1,1) | −0.903% | 0.041** |
event_date_h | (−180,-30) | (−1,1) | −0.764% | 0.081* |
Event Date | Estimation window | Event window | Average |
P value |
---|---|---|---|---|
event_date_n | (−180,-30) | (−1,1) | −0.903% | 0.041** |
event_date_n | (−180,-60) | (−1,1) | −0.849% | 0.060* |
event_date_n | (−120,-30) | (−1,1) | −1.002% | 0.023** |
event_date_n | (−60,-30) | (−1,1) | −1.165% | 0.009*** |
event_date_n | (−30,-10) | (−1,1) | −0.820% | 0.063* |
Event date | Estimation window | Event window | Average |
P value |
---|---|---|---|---|
event_date_n | (−180,-30) | (−1,1) | −0.903% | 0.041** |
event_date_n | (−180,-30) | (−1,2) | −1.082% | 0.038** |
event_date_n | (−180,-30) | (−2,2) | −1.038% | 0.064* |
event_date_n | (−180,-30) | (−5,5) | −0.981% | 0.255 |
event_date_n | (−180,-30) | (−10,10) | −0.128% | 0.915 |
Regression model for CAR
Test for multicollinearity
Variable | VIF | 1/VIF |
---|---|---|
Pre_CSR | 2.21 | 0.452 |
Trend | 1.81 | 0.552 |
PE | 1.77 | 0.564 |
Pre_Pollution | 1.60 | 0.625 |
Media_Att | 1.45 | 0.690 |
Ownership | 1.18 | 0.847 |
Industry | 1.17 | 0.857 |
ROE | 1.16 | 0.862 |
Market | 1.11 | 0.902 |
Size | 1.08 | 0.929 |
Mean VIF | 1.45 |
Mean | Std.err. | CARi
| Trend | Media- Att | Pre-Poll-ution | Pre-CSR | Market | Industry | Size | Ownership | ROE | PE | |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
CARi
| −0.914 | 0.395 | 1 | ||||||||||
Trend | 5.252 | 0.253 | 0.027 (0.741) | 1 | |||||||||
Media-Att | 812.080 | 21.982 | 0.142 (0.082) | −0.491 (0.000) | 1 | ||||||||
Pre-Pollution | 0.419 | 0.020 | −0.048 (0.557) | 0.100 (0.223) | −0.177 (0.030) | 1 | |||||||
Pre-CSR | 9.844 | 0.069 | 0.122 (0.137) | −0.317 (0.000) | 0.091 (0.268) | 0.503 (0.000) | 1 | ||||||
Market | 0.702 | 0.037 | −0.026 (0.753) | −0.083 (0.314) | −0.016 (0.845) | 0.087 (0.288) | 0.246 (0.002) | 1 | |||||
Industry | 7.652 | 1.089 | −0.166 (0.041) | 0.133 (0.105) | −0.126 (0.123) | 0.329 (0.000) | 0.214 (0.009) | −0.025 (0.765) | 1 | ||||
Size | 36.473 | 17.641 | 0.161 (0.048) | 0.100 (0.222) | 0.083 (0.309) | −0.035 (0.665) | −0.093 (0.255) | 0.053 (0.521) | 0.016 (0.845) | 1 | |||
Ownership | 0.437 | 0.041 | 0.091 (0.267) | 0.002 (0.984) | −0.086 (0.295) | −0.165 (0.043) | −0.242 (0.003) | 0.020 (0.812) | −0.019 (0.815) | −0.070 (0.395) | 1 | ||
ROE | 0.205 | 0.033 | −0.070 (0.392) | −0.152 (0.062) | 0.101 (0.219) | 0.124 (0.129) | 0.298 (0.000) | 0.044 (0.588) | 0.016 (0.847) | 0.103 (0.209) | −0.117 (0.151) | 1 | |
PE | 0.397 | 0.040 | 0.114 (0.163) | −0.415 (0.000) | 0.079 (0.335) | 0.159 (0.052) | 0.545 (0.000) | 0.204 (0.012) | 0.048 (0.560) | −0.080 (0.330) | −0.279 (0.001) | 0.291 (0.000) | 1 |
Test method | Hypothesis | Test result | Conclusion |
---|---|---|---|
Breusch-Pagan/ Cook-Weisberg | H0: sigma(i)^2= sigma^2 for all i | chi2(10) = 17.66 Prob > chi2 = 0.061 | Reject H0
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White | H0: sigma(i)^2= sigma^2 for all i | chi2(61) = 79.56 Prob > chi2 = 0.056 | Reject H0
|
Variables | Model 1–1 | Model 2–1 | Model 3–1 | |||
---|---|---|---|---|---|---|
Coef. |
P > t | Coef. |
P > t | Coef. |
P > t | |
Trend | 0.409*** | 0.010 | – | – | 0.498*** | 0.002 |
Media_Att | 0.004** | 0.011 | – | – | 0.004** | 0.013 |
Pre_Pollution | – | – | −1.415 | 0.457 | −1.759 | 0.358 |
Pre_CSR | – | – | 1.606** | 0.012 | 1.880*** | 0.004 |
Market | −0.861 | 0.303 | −1.355 | 0.116 | −1.373 | 0.101 |
Industry | −0.068** | 0.018 | −0.076** | 0.012 | −0.084*** | 0.005 |
Size | 0.004** | 0.025 | 0.005*** | 0.003 | 0.005*** | 0.010 |
Ownership | 1.948** | 0.016 | 1.729** | 0.032 | 2.255*** | 0.005 |
ROE | −1.694* | 0.083 | −2.118** | 0.035 | −2.204** | 0.024 |
PE | 3.370*** | 0.000 | 1.262 | 0.189 | 2.321** | 0.020 |
cons | −7.371*** | 0.001 | −15.608*** | 0.006 | −24.595*** | 0.000 |
observations | 151 | 151 | 151 | |||
R2
| 0.169 | 0.157 | 0.220 | |||
Adjusted R2
| 0.123 | 0.110 | 0.165 |
Variables | Model 1–2 | Model 2–2 | Model 3–2 | |||
---|---|---|---|---|---|---|
Coef. |
P > t | Coef. |
P > t | Coef. |
P > t | |
Trend | 0.393** | 0.029 | – | – | 0.478*** | 0.009 |
Media_Att | 0.004* | 0.051 | – | – | 0.004* | 0.056 |
Pre_Pollution | – | – | −0.708 | 0.740 | −1.114 | 0.609 |
Pre_CSR | – | – | 1.524** | 0.034 | 1.817** | 0.013 |
Market | −0.976 | 0.302 | −1.440 | 0.137 | −1.481 | 0.120 |
Industry | −0.057* | 0.075 | −0.068** | 0.045 | −0.076** | 0.023 |
Size | 0.004** | 0.050 | 0.005* | 0.011 | 0.005** | 0.024 |
Ownership | 2.096** | 0.022 | 1.908** | 0.035 | 2.416*** | 0.008 |
ROE | −0.932 | 0.394 | −1.375 | 0.218 | −1.447 | 0.187 |
PE | 3.802*** | 0.000 | 1.737 | 0.109 | 2.756*** | 0.015 |
cons | −7.189*** | 0.005 | −15.495*** | 0.016 | −24.098*** | 0.001 |
observations | 153 | 153 | 153 | |||
R2
| 0.131 | 0.127 | 0.172 | |||
Adjusted R2
| 0.083 | 0.078 | 0.113 |