Information Disclosure Mandates in Authoritarian Regimes

Disclosures of corporate sustainability information are critical to effective environmental governance and regulation. However, firms face incentives misaligned between profit maximization and social responsibility, posing challenges for governments aiming to compel compliance with disclosure obligations. While existing literature has examined how firm-level attributes and stakeholder pressures influence disclosure practices in democratic political systems, less is known about the disclosure strategies firms employ within authoritarian regimes, where concentrated political power introduces additional complexities. 

The present study examines how political connections and policy signals interactively shape the environmental information disclosure practices of Chinese listed firms. We hypothesize that prior to policy signaling, political ties negatively impact the propensity and extent of disclosure, owing to reduced regulatory uncertainty and diminished scrutiny. However, subsequent to policy signaling, politically connected firms demonstrate markedly greater responsiveness to comply with demands for increased disclosure in order to maintain government favor. 

An analysis of disclosure responses to centralized environmental oversight indicates that pre-signaling, political connections decrease the likelihood and degree of disclosure. Post-signaling, in contrast, politically connected firms exhibit significantly higher responsiveness, consistent with a strategic balancing of political and economic interests.

This study makes several contributions to the literature. First, we extend research on the determinants of disclosure to authoritarian institutional settings. Second, rather than examining political ties or policy signals in isolation, we explore their interactive effects. Third, we focus not solely on regulators’ strategic use of discretion, but also on the strategic responses of firms to political signals when politically connected.