Revisiting the relation between environmental performance and environmental disclosure: An empirical analysis
Previous empirical evidence provides mixed results on the relationship between corporate environmental performance and the level of environmental disclosures. We revisit this relation by testing competing predictions from economics based and socio-political theories of voluntary disclosure using a more rigorous research design. In particular, we improve on the prior literature by focusing on purely discretionary environmental disclosures and by developing a content analysis index based on the Global Reporting Initiative sustainability reporting guidelines to assess the extent of discretionary disclosures in environmental and social responsibility reports. This index better captures firm disclosures related to its commitment to protect the environment than the indices employed by prior studies. Using a sample of 191 firms from the five most polluting industries in the US, we find a positive association between environmental performance and the level of discretionary environmental disclosures. The result is consistent with the predictions of the economics disclosure theory but inconsistent with the negative association predicted by socio-political theories. Nevertheless, we show that socio-political theories explain patterns in the data (“legitimization”) that cannot be explained by economics disclosure theories.
Peter M. ClarksonaEmail:p.clarkson@business.uq.edu.au?Yue LicEmail:yueli@rotman.utoronto.ca?Gordon D. Richardsonc Email:gordon.richardson@rotman.utoronto.ca?Florin P. VasvaridEmail:fvasvari@london.edu
[a]UQ Business School, The University of Queensland, Australia;[b]Faculty of Business Administration, Simon Fraser University, Canada;[c]Joseph Rotman School of Management, University of Toronto, 105 St. George Street, Toronto, Ontario, Canada M5S 3E6;[d]London Business School, University of London, London, United Kingdom
