Stakeholders often have a significant interest in the disclosure of information by companies that have received environmental penalties. This study examines how environmental administrative penalties influence companies’ environmental disclosures. Using a sample of 316 manufacturing companies across three years in China, the regression results indicate that the level of voluntary environmental information disclosure (EID) is significantly positively affected by environmental penalties. For companies in heavily polluting industries, environmental penalties decrease their involuntary EID. Environmental penalties also reduce the quality of environmental information, which is mainly reflected in the weakening of the integrity, comprehensibility, and relevance of environmental information in corporate social responsibility (CSR) reports or environmental reports. These findings help us to understand the sustainability of corporate environmental responsibility in the context of environmental administrative penalties.

For a listed company the information about self-disclosing its environmental penalty will provide investors with reliable sources to observe its environmental situation. This study, employing the event study method, examines the stock market’s reaction before and after its environmental penalty announcement. The impacts of environmental penalties on companies’ abnormal returns during the observation period are evaluated as well. The findings reveal that the accumulative abnormal returns of penalized companies will drop before the environmental penalty announcements. Besides, selfdisclosing the environmental penalty will ease the negative impacts on their abnormal returns, and the disclosure of detailed rectification measures and the impacts of penalty in the announcements will increase their abnormal returns as opposed to bring further damage to their stock market returns. Our results suggest that the self-disclosure of penalty information prevents the decline of stock market returns, which implies that self-disclosure has a positive effect on companies’ reactions in terms of market value.