The impact of a tournament approach on environmental performance: the case of air quality disclosure in China

ABSTRACT

We examine the effect of air quality tournament over the 2012–2016 period on city – and firm-level environmental performance in China. We document that government officials and firm managers of tournament cities change their behavior and make more environmental investments (EIs) than those of non-tournament cities. Additional analysis suggests that the increase in EIs is primarily driven by cities that have previously been ranked last in the tournament. Hence, government official and manager behavior become more pro-environment after the implementation of the air quality tournament. Furthermore, when there is a large grassroots participation, local media reporting, or when the official is motivated to promotion, the impact of tournament participation on EIs is magnified, implying pro-environment behavior changes become more salient when there are outside pressure or strong official incentives. Most importantly, we find the tournament cities experience better air quality than non-tournament cities. Policy implications are discussed.

KEYWORDS:

• Air pollution
• tournament
• disclosure
• environmental investments
• official and manager behavior

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Conlerly (2019) reports that China had double-digit real GDP before 2008, followed by 6 to 8% range, and a 6% growth in 2018.

https://www.forbes.com/sites/billconerly/2019/03/09/china-is-too-mature-for-rapid-growth/#467e08ec65df (accessed 16 August 2019)

² https://translate.google.com/translate?hl = en&sl = zh-CN&u =http://www.gov.cn/zwgk/2013-09/12/content_2486773.htm&prev=search (accessed 6 October 2019)

³ There were 34 provinces and autonomous cities in China. Autonomous cities, while different in names, are de facto provinces due to their large population and economic importance. Hence, for our paper, we treat these autonomous cities as provinces. Districts in these autonomous cities are treated as cities in a province.

⁴ The number of prefecture-level cities changed slightly over time. For instance, the number of cities is 343, 346, and 348 in 2014 to 2016, respectively. We do not include the new cities in our analysis because these newer firms did not participate in ranking in 2013.

⁵ We do not examine Eq. (9) using firm-level data because only a small number of firms disclose their pollution emissions.