International Journal of Finance & Managerial Accounting

International Journal of Finance & Managerial Accounting

The relationship of companies' environmental sustainability performance and the level of information voluntary disclosure quality

Document Type : Original Article

Authors
Hamed Payandehdoost Masooleh 1
Sina Kheradyar 2
Mohammadreza Vatanparast 3
1 Ph.D Student of accounting, Rasht Branch, Islamic Azad University, Rasht, Iran.
2 Assistant Professor, Department of Accounting, Rasht Branch, Islamic Azad University, Rasht, Iran.
3 Assistant Professor Department of Accounting, Rasht Branch, Islamic Azad University, Rasht, Iran.
10.30495/ijfma.2022.19522
Abstract
The present paper has examined the relationship between environmental sustainability performance with quality of voluntary disclosure of 71 different companies during the period of 2012 to 2018 (total number of 497 year-company). In order to measure the environmental sustainability performance and voluntary disclosure of these companies, a content analysis of the board of directors’ reports was conducted. With this end in view, a checklist, consisting of 5 environmental sustainability performance components and 16 voluntary disclosure components, was prepared, and the multivariate regression method was used to test the research hypotheses. The research findings indicated that 279 year-company disclosed their information with high quality, compared with 218 year-company that provided their information with low quality. In other words, most of the investigated companies disclosed their information with significant disclosure. Moreover, it was notable that there was a statistically significant relationship between the high- and low-quality voluntary disclosed information and environmental sustainability performance of the investigated companies. The results also revealed that, based on the theory of voluntary disclosure, the superior sustainability performers preferred to disclose the information with high quality to demonstrate their performance superiority over the market, whereas based on the legitimacy theory, poor sustainability performers used low quality information disclosure to simultaneously conceal their actual performance and protect their justifications.
Keywords
Environmental Sustainability Performance
Voluntary Disclosure of Information
High and Low Quality of Voluntary Disclosure
  • Abdur Rouf, Md. (2011). The corporate social responsibility disclosure: A study of listed companies in Bangladesh. Business and Economics Research Journal, 2(3), 19-32.
  • Al-Tuwaijri, S. A., Christensen, T. E., & Hughes Ii, K. E. (2004). The relations among environmental disclosure, environmental performance, and economic performance: a simultaneous equations approach. Accounting, Organizations and Society, 29(5-6), 447-471.
  • Ameer, R., & Othman, R. (2012). Sustainability practices and corporate financial performance: A study based on the top global corporations. Journal of Business Ethics, 108(1), 61-79.
  • Barth, M. E., Landsman, W. R., & Lang, M. H. (2008). International accounting standards and accounting quality. Journal of Accounting Research, 46(3), 467-498.
  • Bewley, K., & Li, Y. (2000). Disclosure of environmental information by Canadian manufacturing companies: A voluntary disclosure perspective. Advances in Environmental Accounting and Management, 1(1), 201-226.
  • Braam, G., & Peeters, R. (2018). Corporate sustainability performance and assurance on sustainability reports: Diffusion of accounting practices in the realm of sustainable development. Corporate Social Responsibility and Environmental Management, 25(2), 164-181.
  • Branco, M. C., & Rodrigues, L. L. (2008). Factors influencing social responsibility disclosure by Portuguese companies. Journal of Business Ethics, 83(4), 685-701.
  • Cho, C. H., Guidry, R. P., Hageman, A. M., & Patten, D. M. (2012). Do actions speak louder than words? An empirical investigation of corporate environmental reputation. Accounting, Organizations and Society, 37(1), 14-25.
  • Cho, C. H., & Patten, D. M. (2007). The role of environmental disclosures as tools of legitimacy: A research note. Accounting, Organizations and Society, 32(7-8), 639-647.
  • Clarkson, P. M., Li, Y., Richardson, G. D., & Vasvari, F. P. (2008). Revisiting the relation between environmental performance and environmental disclosure: An empirical analysis. Accounting, Organizations and Society, 33(4-5), 303-327.
  • Clarkson, P. M., Overell, M. B., & Chapple, L. (2011). Environmental reporting and its relation to corporate environmental performance. Abacus, 47(1), 27-60.
  • Dawkins, C., & Fraas, J. W. (2011). Coming clean: The impact of environmental performance and visibility on corporate climate change disclosure. Journal of Business Ethics, 100(2), 303-322.
  • Deegan, C. (2002). The legitimising effect of social and environmental disclosures–a theoretical foundation. Accounting, Auditing & Accountability Journal, 15(3), 282-311.
  • Dhaliwal, D. S., Li, O. Z., Tsang, A., & Yang, Y. G. (2011). Voluntary nonfinancial disclosure and the cost of equity capital: The initiation of corporate social responsibility reporting. The accounting Review, 86(1), 59-100.
  • Foroghi, D., & Alidadi Shamsabadi, J. (2017). The influence of the interlocked board of directors on voluntary disclosure and earning quality. The Financial Accounting And Auditing Researches,9(34); 61-84.
  • Freeman, R. E. (2010). Strategic management: A stakeholder approach. Boston, MA: Cambridge University Press.
  • Gozali, N. O., How, J. C., & Verhoeven, P. (2002). The economic consequences of voluntary environmental information disclosure. Journal of Accounting and Public Policy, 25, 609-625.
  • Hashemi, S., Ghasemi, M., rafiee shahraki, A. (2019). Effect of Corporate Sustainability on Excess Stock Returns and Profitability. Journal of Accounting Research, 9(2), 119-138.
  • Hendriksen, E. S., & Van Breda, M. F. (2000). Accounting Theory. Chicago: Irwin.
  • Hummel, K., & Schlick, C. (2016). The relationship between sustainability performance and sustainability disclosure–Reconciling voluntary disclosure theory and legitimacy theory. Journal of Accounting and Public Policy, 35(5), 455-476.
  • Iatridis, G. (2008). Accounting disclosure and firms’ financial attributes: Evidence from the UK stock market. International Review of Financial Analysis, 17(2), 219-241.
  • Khan, M., Serafeim, G., & Yoon, A. (2016). Corporate sustainability: First evidence on materiality. The Accounting Review, 91(6), 1697-1724.
  • Khajavi, Sh., Hosseini Nia, S., & Nasiri, T. (2019). The relationship between corporate governance and environmental voluntary disclosure (Case study from companies on chemical industries and pharmaceutical product). The Financial Accounting and Auditing Researches, 10(40), 1-20.
  • Kolk, A. (2003). Trends in sustainability reporting by the Fortune Global 250. Business Strategy and the Environment, 12(5), 279-291.
  • Mahdavi, G., Daryaei, A., Alikhani, R., & Maranjory, M. (2015). The Relation of Firm Size, Industry Type and Profitability to Social and Environmental Information Disclosure. Empirical Research in Accounting, 4(3), 87-103.
  • O’donovan, G. (2002). Environmental disclosures in the annual report. Accounting, Auditing & Accountability Journal, 15 (3), 344–371.
  • Pifeh, A. (2016). Investigating the relationship between sustainability performance and financial performance and the value of companies listed on the Tehran Stock Exchange [unpublished M.A. thesis]. Sistan and Baluchestan University.
  • Plumlee, M., Brown, D., & Marshall, S. (2008). The impact of voluntary environmental disclosure quality on firm value. Available at http://ssrn.com.
  • PricewaterhouseCoopers (PWC). (2016). Guide to forward looking information. Retrieved from http://www.pwc.com/gx/en/audit-services/corporate-reporting/assets/pdfs/ uk-fl-info-guide.pdf.
  • Rezaee, Z. (2016). Business sustainability research: A theoretical and integrated perspective. Journal of Accounting Literature, 36, 48-64.
  • Sajadi, S., & Bonabi Ghadim, R. (2015). Sustainable Performance Management Systems and Indicators. Journal of Accounting Research, 4(4), 69-82.
  • Suchman, M. C. (1995). Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20(3), 571-610.
  • Wasara, T. M., & Ganda, F. (2019). The relationship between corporate sustainability disclosure and firm financial performance in Johannesburg Stock Exchange (JSE) listed mining companies. Sustainability, 11(16), 4496.
  • Wood, D. J. (1991). Corporate social performance revisited. Academy of Management Review, 16(4), 691-718.
  • Rezaee, Z., & Tuo, L. (2017). Voluntary disclosure of non-financial information and its association with sustainability performance. Advances in Accounting, 39, 47-59.