Finance and Accounting Research Seminar with Professor Bin Xu

Title:Does segment disclosure constrain corporate pollution?

Abstract: We examine whether corporate segment disclosure affects firm environmental performance. Exploiting the adoption of SFAS 131 as a shock, we find that mandatory disclosure of previously hidden segments that belong to pollutive industries reduces toxic pollution of firm plants. Consistent with the notion that segment disclosure enhances the monitoring of firm pollution by highlighting the materiality of pollutive segments and drawing stakeholders’ attention to underlying environmental issues, the effect is stronger for plants that are under less stringent regulatory and public scrutiny and when the newly disclosed segments are more pollutive. Disclosing firms reduce pollution by enhancing pollution prevention practices and increasing green innovation, which in turn reduces environmental violations. Overall, this study uncovers the role of segment disclosure in curbing corporate pollution.