Business groups and environmental violations: Evidence from China

Yasir Shahab, Tanveer Hussain, Peng Wang, Ma Zhong and Satish Kumar
Authors registered in the RePEc Author Service: Satish Kumar and Satish Kumar

International Review of Financial Analysis, 2023, vol. 85, issue C

Abstract: Although, in the modern era, stakeholders put pressure on firms to engage in environmental friendly practices, yet collaborative arrangements in the shape of business group affiliations may prove a double-edged sword. Accordingly, this study examines the impact of such collaborative arrangements on firm's environmental violations. On one hand, this affiliation can better pursue environmental policies and regulations because of their higher political or social visibility and reduce environmental infractions. Conversely, higher political legitimacy may derive from engaging in environmental violations. Using a unique sample from China comprising 6860 firm-year observations over the 2010 to 2020 time period, we find that business group affiliation increases environmental violations, implying that stronger political legitimacy provides them relaxation in strictly following environmental regulations in comparison to standalone firms. We also find that this nexus is more pronounced when the affiliated firms have poor shareholder and board monitoring. These findings are helpful for policymakers/regulators concerning the initiative's evaluation regarding sustainable development and ecological protection.

Keywords: Business groups; Environmental violations; Political legitimacy; Board monitoring (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:85:y:2023:i:c:s1057521922004094

DOI: 10.1016/j.irfa.2022.102459

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