Does third-party monitoring reduce environmental violations in mining firms?

Abstract

Compared to air and water pollution, mining pollution is often more difficult to identify and monitor due to its inherent concealment and persistence. The inadequacy of government regulatory oversight also implies the potential to leverage the widespread and continuous benefits of third-party monitoring. This study conducts a quasi-natural experiment based on the Pollution Information Transparency Index (PITI) project launched by environmental organizations to observe the net impact of third-party monitoring on firms. Using longitudinal data (2006–2018) on Chinese listed firms in the mining industry, and based on a series of endogeneity and robustness tests, we observe robust evidence that third-party monitoring can significantly reduce corporate environmental violations in mining firms. Heterogeneity analysis shows that, compared to non-open-pit mining firms, open-pit mining firms show a more pronounced improvement in the impact of third-party monitoring on corporate environmental violations. And compared to non-coal mining firms, coal mining firms are more susceptible to third-party monitoring. Mechanism analysis shows that third-party monitoring works through promoting government environmental enforcement, broader public participation, and firms' disclosure quality. Further analysis suggests that third-party monitoring can still be effective in cases where environmental enforcement is weak.