Influence of Financial Conditions on the Environmental Information Disclosure of Construction Firms

Abstract

Corporate social responsibility (CSR) has become a crucial issue for firms seeking to achieve sustainable development. To achieve transparent CSR, firms usually publish their environmental initiatives and accomplishments—otherwise known as an environmental information disclosure (EID). There is a growing interest in the incentives behind EID and the implications for firms’ market capitalization and profitability. However, existing EID studies are mainly rooted in the manufacturing industry; there is a dearth of research related to the construction industry. It is still unclear whether construction engineering firms with superior financial conditions (i.e., doing well financially) have the incentives to signal and distinguish themselves from others by making more extensive EID (i.e., doing good environmentally). Therefore, this study conducts a secondary data analysis of 60 listed construction firms. The results reveal that the financial leverage (i.e., liabilities to assets ratio) is negatively correlated with the level of EID, whereas the relationship between financial performance (i.e., return on equity) and EID is not significant. Furthermore, the ownership structure (i.e., the proportion of state-owned equity) yields a negative moderating effect on the relationship between financial leverage and EID, i.e., the ownership structure buffers firms from (rather than binds firms to) institutional pressures. This study contributes to extending the influencing mechanism of financial conditions and shedding new light on governing environmental responsibility in construction firms.