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The impact of air pollution on financial reporting quality: evidence from China

The impact of air pollution on financial reporting quality: evidence from China In this study, we investigate whether the unpleasant mood of managers caused by air pollution leads to poorer decision‐making quality. Using a sample of 9,282 firm‐year observations from 2014 to 2017 in China, we show that (i) the mood of managers becomes more negative as air quality decreases; and (ii) there is a negative relation between air pollution and financial reporting quality. Furthermore, this association is stronger for firms with (i) weaker corporate governance; and (ii) top management teams with a lower average age, fewer females and a lower average educational level. Our results hold through various robustness tests. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Accounting & Finance Wiley

The impact of air pollution on financial reporting quality: evidence from China

Hu, Nan; Xue, Xingnan; Liu, Ling
Accounting & Finance , Volume Early View – Dec 20, 2021
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36 pages

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Publisher
Wiley
Copyright
Accounting and Finance © 2021 Accounting and Finance Association of Australia and New Zealand
ISSN
0810-5391
eISSN
1467-629X
DOI
10.1111/acfi.12898
Publisher site
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Abstract

In this study, we investigate whether the unpleasant mood of managers caused by air pollution leads to poorer decision‐making quality. Using a sample of 9,282 firm‐year observations from 2014 to 2017 in China, we show that (i) the mood of managers becomes more negative as air quality decreases; and (ii) there is a negative relation between air pollution and financial reporting quality. Furthermore, this association is stronger for firms with (i) weaker corporate governance; and (ii) top management teams with a lower average age, fewer females and a lower average educational level. Our results hold through various robustness tests.

Journal

Accounting & Finance – Wiley

Published: Dec 20, 2021

Keywords: Air pollution; Financial reporting quality; Mood; RDD

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