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Strategic posture, financial performance and environmental disclosure: An empirical test of legitimacy theory

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  • Vanessa Magness
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    Abstract

    Purpose – The objective of this paper is to test Ullmann's hypothesis that strategy posture, modified by financial performance, must be considered in light of stakeholder power in order to understand a company's social responsibility disclosure policy. Design/methodology/approach – This study in this paper uses regression analysis to examine annual report disclosure of environmental information after a major accident in the mining industry. A multiple-item disclosure score is tailored to the Canadian accounting environment, and used as a dependent variable. Findings – This paper finds that companies that maintain themselves in the public eye through press release activity disclose more information than other companies. However there is no evidence to suggest that disclosure content is moderated by financial performance. Companies that obtained external financing one year after the accident made more disclosure than other companies. The significance of the external financing variable is evident when disclosure is restricted to discretionary or non-financial items, but disappears if the dependent variable represents mandatory financial items. Research limitations/implications – The paper shoes that while Ullmann addressed the matter of actual social responsibility performance, in addition to disclosure, this paper does not examine performance. Furthermore, press release activity is only one type of strategic posture. Future work that employs some other measure may yield additional insight into the decision-making process. Originality/value – Prior study of Ullmann's work has not considered the interactive impact of profit and strategic posture. Furthermore, the actual nature of the disclosure, voluntary versus mandatory, has not been specifically examined. This paper addresses both of these issues.

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    Bibliographic Info

    Article provided by Emerald Group Publishing in its journal Accounting, Auditing & Accountability Journal.

    Volume (Year): 19 (2006)
    Issue (Month): 4 (July)
    Pages: 540-563

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    Handle: RePEc:eme:aaajpp:v:19:y:2006:i:4:p:540-563

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    Related research

    Keywords: Accounting; Canada; Disclosure; Financial performance; Mining industry; Social responsibility;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Patten, Dennis M., 1991. "Exposure, legitimacy, and social disclosure," Journal of Accounting and Public Policy, Elsevier, vol. 10(4), pages 297-308.
    2. J.B. Smith & W A. Sims, 1985. "The Impact of Pollution Charges on Productivity Growth in Canadian Brewing," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 410-423, Autumn.
    3. Darrell, W. & Schwartz, Bill N., 1997. "Environmental disclosures and public policy pressure," Journal of Accounting and Public Policy, Elsevier, vol. 16(2), pages 125-154.
    4. Roberts, Robin W., 1992. "Determinants of corporate social responsibility disclosure: An application of stakeholder theory," Accounting, Organizations and Society, Elsevier, vol. 17(6), pages 595-612, August.
    5. Wiseman, Joanne, 1982. "An evaluation of environmental disclosures made in corporate annual reports," Accounting, Organizations and Society, Elsevier, vol. 7(1), pages 53-63, January.
    6. Cowen, Scott S. & Ferreri, Linda B. & Parker, Lee D., 1987. "The impact of corporate characteristics on social responsibility disclosure: A typology and frequency-based analysis," Accounting, Organizations and Society, Elsevier, vol. 12(2), pages 111-122, March.
    7. Rob Gray & Mohammed Javad & David M. Power & C. Donald Sinclair, 2001. "Social and Environmental Disclosure and Corporate Characteristics: A Research Note and Extension," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 28(3-4), pages 327-356.
    8. Neu, D. & Warsame, H. & Pedwell, K., 1998. "Managing public impressions: environmental disclosures in annual reports," Accounting, Organizations and Society, Elsevier, vol. 23(3), pages 265-282, April.
    9. Patten, Dennis M., 1992. "Intra-industry environmental disclosures in response to the Alaskan oil spill: A note on legitimacy theory," Accounting, Organizations and Society, Elsevier, vol. 17(5), pages 471-475, July.
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    Citations

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    Cited by:
    1. Marisa Agostini & Ericka Costa, 2012. "Mandatory disclosure about environmental and employee matters in Italian listed corporate groups' reports," Working Papers 6, Department of Management, Università Ca' Foscari Venezia.
    2. Vanessa Magness, 2008. "Who are the Stakeholders Now? An Empirical Examination of the Mitchell, Agle, and Wood Theory of Stakeholder Salience," Journal of Business Ethics, Springer, vol. 83(2), pages 177-192, December.
    3. Cho, Charles H. & Roberts, Robin W. & Patten, Dennis M., 2010. "The language of US corporate environmental disclosure," Accounting, Organizations and Society, Elsevier, vol. 35(4), pages 431-443, May.
    4. Aapo Länsiluoto & Marko Järvenpää, 2008. "Environmental and performance management forces: Integrating “greenness” into balanced scorecard," Qualitative Research in Accounting & Management, Emerald Group Publishing, vol. 5(3), pages 184-206, September.
    5. David Owen, 2008. "Chronicles of wasted time?: A personal reflection on the current state of, and future prospects for, social and environmental accounting research," Accounting, Auditing & Accountability Journal, Emerald Group Publishing, vol. 21(2), pages 240-267, February.
    6. Toms, Steven, 2008. "Asymmetric Response: Explaining Corporate Social Disclosure by Multi-National Firms in Environmentally Sensitive Industries," The York Management School Working Papers 42, The York Management School, University of York.
    7. Isabel-María García Sánchez & Luis Rodríguez Domínguez & Isabel Gallego Álvarez, 2011. "Corporate governance and strategic information on the internet: A study of Spanish listed companies," Accounting, Auditing & Accountability Journal, Emerald Group Publishing, vol. 24(4), pages 471-501, May.
    8. Marie-Andrée Caron & Marie-France B. Turcotte, 2009. "Path dependence and path creation: Framing the extra-financial information market for a sustainable trajectory," Accounting, Auditing & Accountability Journal, Emerald Group Publishing, vol. 22(2), pages 272-297, February.
    9. Theofanis Karagiorgos, 2010. "Corporate Social Responsibility and Financial Performance: An Empirical Analysis on Greek Companies," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 85-108.

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