When speed trumps sustainability: Environmental disclosure frequency and environmental investment myopia
Sheryl Zhang  1@  
1 : Essec Business School
ESSEC Business School

This study examines the effect of increasing mandatory environmental disclosure frequency on firms' environmental investment choices between short-term solutions (end-of-pipe) and long-term investments (clean technologies). Clean technologies (e.g., adopting renewable energy) achieve long-term environmental efficiency by preventing pollution at the source but require a longer implementation period. In contrast, end-of-pipe solutions (e.g., scrubbers or filters) are immediate remedies for specific pollutants post-production. Increased disclosure frequency mandate, coupled with public scrutiny, could steer firms toward the immediacy of end-of-pipe solutions at the expense of adopting sustainable clean technology. Examining a Chinese regulation transitioning from annual to daily mandatory emission reporting, I find that regulated firms increase end-of-pipe investments but reduce clean technology investments. Consistent with the limitations of end-of-pipe, treated firms cut regulated pollutant emissions but increase unregulated carbon emissions. This myopia pattern is more pronounced for firms with more public oversight of pollution and for those that are more likely to violate pollution standards or face more severe consequences upon violations. However, firms receiving government subsidies for clean technologies experience a weaker effect. Amidst the growing demand for timely ESG information, this study highlights the adverse incentive created by the potential cost of such regulation.


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