Corporate governance and corporate environmental investment: Evidence from China
Chinese Economics Society Australia
School of Business and Law
Existing literature has analyzed the determinants of corporate environmental investment from the perspective of external pressures, while less attention was paid to the impacts of internal decision makers i.e., controlling shareholders and managers. Using a dataset of Chinese listed companies over
the period 2008 to 2013, this paper empirically examines whether there is collusion between controlling shareholders and managers in making the environmental investments decisions. We find that the separation of controlling shareholder’s control right and cash flow right is negatively correlated to corporate environmental investment. Moreover, managerial ownership strengthens the negative correlation abovementioned, which is consistent with the controlling shareholder-manager collusion hypothesis. A further test suggests that internal control effectively weakens the controlling shareholder-manager collusion.