The Impact of Air Pollution on Financial Reporting Quality - Evidence from China

Hu, Nan and Xue, Xingnan, The Impact of Air Pollution on Financial Reporting Quality - Evidence from China (November 25, 2020). air pollution, financial reporting quality, Available at SSRN: https://ssrn.com/abstract=3925905

Posted: 20 Sep 2021 Last revised: 27 Dec 2021

See all articles by Nan Hu

Nan Hu

Xi'an Jiaotong University (XJTU) - School of Management; Stevens Institute of Technology - School of Business

Xingnan Xue

Xi'an Jiaotong University (XJTU) - School of Management

Ling Liu

affiliation not provided to SSRN

Date Written: November 25, 2020

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 1) the mood of managers becomes more negative as air quality decreases; and 2) there is a negative relation between air pollution and financial reporting quality. Furthermore, this association is stronger for firms with 1) weaker corporate governance; and 2) lower average age, fewer female executives, and lower average educational level of top management teams. Our results hold when we employ more robustness tests.

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

JEL Classification: G30 G31

Suggested Citation

Hu, Nan and Hu, Nan and Xue, Xingnan and Liu, Ling, The Impact of Air Pollution on Financial Reporting Quality - Evidence from China (November 25, 2020). Hu, Nan and Xue, Xingnan, The Impact of Air Pollution on Financial Reporting Quality - Evidence from China (November 25, 2020). air pollution, financial reporting quality, Available at SSRN: https://ssrn.com/abstract=3925905, Available at SSRN: https://ssrn.com/abstract=3925905

Nan Hu

Xi'an Jiaotong University (XJTU) - School of Management ( email )

28,Xianning West Road
Xi'an, Shaanxi 710049
China

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

Xingnan Xue (Contact Author)

Xi'an Jiaotong University (XJTU) - School of Management ( email )

26 Xianning W Rd.
Xi'an Jiao Tong University
Xi'an, Shaanxi 710049
China

Ling Liu

affiliation not provided to SSRN

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