ABSTRACT
This paper examines whether violations of national environmental and social (ES) legislation affect enforcement by securities regulators in China. Enforcement of securities laws is a political and discretionary process in which securities regulators can help fulfill the government’s ES goals. We find that ES violations of national legislation increase the likelihood and severity of enforcement actions by the China Securities Regulatory Commission and the Shanghai and Shenzhen stock exchanges. ES violations of international standards or ES incidents that do not violate national legislation are not related to securities enforcement. ES violations have a greater impact on securities enforcement when they are less characteristic of a firm’s recent good environmental, social, and governance (ESG) performance. Providing an ESG report and large employer size mitigate the effect of ES violations on securities enforcement. Firms with high amounts of undisclosed ES fines are more likely to be targeted for disclosure deficiencies.
Data Availability: The data used in this study are publicly available from the sources cited in the text.
JEL Classifications: M14; M41; Q56.
