Reexamining the Association between Environmental Disclosure and Environmental Performance

• In Event: Breakfast and Rountable
  In Paper Session: Table 5

Abstract

The importance and the amount of environmental disclosures – which includes financial and non-financial information – have significantly increased over the last two decades. There is a debate among scholars about the reliability of this information and whether this type of voluntary disclosure is informative or opportunistic. One string of research argues that environmental disclosure is motivated by economic laws of supply and demand which drive firms to provide investors with information about their environmental performance. Other studies suggest that this type of - largely unregulated - disclosure provide firms with an opportunity to legitimize their operations and create a positive impression about their environmental performance. Previous research fails to acknowledge that economic and legitimacy factors could mutually influence firms’ disclosure decisions. Furthermore, prior research neglects the interaction between these factors and firms’ environmental performance and its impact on firms’ disclosures.
I attempt to close the gap between those opposing views by conducting a panel data analysis of disclosures made by 78 US firms operating in environmentally sensitive industries over a period of 14 years (from 1997 to 2010). The objective of this study is to answer the following questions:
1. To what extent do economic and legitimacy factors impact firms’ environmental disclosure?
2. Does the impact of these factors vary according to firms’ environmental performance?

The study provides a comprehensive framework that explains firms’ disclosure process integrating economic and legitimacy factors, the moderating effect of environmental performance.

Authors

• Hani Tadros, Elon University

• Michel L Magnan, Concordia University