Disclosure of enterprises' environmental violations: evidence from Chinese public supervision

Abstract

Environmental violation by enterprises is a common problem in environmental management worldwide. To restrict enterprises' environmental pollution behaviors, China has implemented a public supervision system based on environmental information publicity, which guides the public to participate in environmental governance and supervises enterprises' environmental pollution behaviors. This study exploits a quasi-natural experiment based on the disclosure policy of the Pollution Information Transparency Index in China from 2008 and the difference-in-differences method to evaluate the disclosure effect of public supervision on enterprises' environmental violations, and to examine its environmental benefits and their realization path. We find that the public supervision system is conducive to the disclosure of enterprises' environmental violations. At the same time, public supervision has achieved the expected environmental benefits, mainly realized by reducing enterprises' output to reduce polluting emissions, and this mechanism is more obvious for high-polluting enterprises.