With the development of the economy and the increasingly prominent environmental problems, the opportunism of firms in the environmental decision-making leads to more common environmental violations. Illegal pollution discharge, falsification of monitoring data and failing to install environmental protection equipment as required are common, which forces us to explore the causes of environmental violations. Environmental governance has the characteristics of morality and pro-society, so a few studies focus on the impact of informal institutional norms such as religious belief, hometown identity and national culture on corporate environmental information disclosure, environmental investment and carbon emission. The values and ethics of social trust constitute the yardstick of social members’ interaction, which can curb the immoral behavior of firms, so firms subject to social trust may also reduce environmental violations by making more moral commitments to stakeholders.
This paper takes the pilot reform of the social credit system as a quasi-natural experiment to study whether the construction of the institutionalized social credit system will inhibit corporate environmental violations. It is found that compared with that before the establishment of the social credit system reform, the frequency of environmental violations in pilot areas is reduced by 13.49% on average compared with that in non-pilot areas. The conclusion is still valid after considering a series of robustness tests and alternative explanations. Heterogeneity analysis finds that government trust, media coverage and local awareness of environmental protection strengthen the inhibitory effect of the establishment of social credit system on corporate environmental violations. Further research shows that the inhibitory effect of the establishment of social credit system on corporate environmental violations is more significant in areas with a lack of general trust and higher dialect diversity, indicating that institutionalized social trust makes up for the deficiency of relational social trust.
The possible contributions are as follows: First, existing literature studies the influencing factors of corporate environmental governance from the perspective of environmental regulation and capital market participants. This paper finds that social trust, as an informal system, can reduce the unethical behavior of firms in the environment, which enriches and expands the literature on the influencing factors of environmental governance from a cultural perspective. Second, this paper takes the pilot reform of social credit system as a shock of social trust, which establishes the causal relationship between social trust and corporate environmental violations, and supplements the literature on the economic consequences of social trust. Third, this paper finds that institutionalized social trust can make up for the deficiency of relational social trust, which has new enlightenment for understanding the effect of social credit system construction and the reconstruction of social trust.