Environmental investment growth (EIG) and corporate cost stickiness in China: substantive or symbolic management?

Abstract

Purpose Considering the greenwashing risk of symbolic environmental management, this study aims to distinguish the motivation for environmental investment growth (EIG) from the corporate cost stickiness and anti-stickiness perspectives. Design/methodology/approach This study analyzes the impact of substantive and symbolic environmental management on cost stickiness. Subsequently, competing hypotheses are proposed. Finally, empirical tests are conducted on Chinese A-share listed companies from 2010 to 2019. Findings EIG significantly improves enterprises’ cost stickiness. The cost of high EIG enterprises does not decrease significantly with a decline in income compared to other enterprises, which is consistent with the motivation for substantive environmental management. Enterprises with high asset specificity and optimistic management expectations show more obvious substantive environmental management. Government and public environmental concerns cause more pronounced substantive environmental management. Practical implications An evaluation of corporate environmental responsibility should take into account both what the company has disclosed and what it has actually done. Social implications Governments and the public should have a comprehensive understanding of corporate environmental management. They need to strengthen their ability to recognize symbolic environmental management and support substantive environmental management. Originality/value Fundamental to the evaluation of corporate environmental responsibility, this study distinguishes the motivations for corporate EIG disclosures from the cost stickiness perspective to avoid the risk of greenwashing. Hypotheses on the impact of substantive and symbolic environmental management on cost stickiness are presented. This study verifies the substantive environmental management characteristics of listed Chinese companies.