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Time to clean up environmental liabilities reporting: disclosures, media exposure and market implications

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  • Mari Paananen
  • Emmeli Runesson
  • Niuosha Samani

Abstract

We investigate firms’ disclosures related to environmental liabilities (EL), how these vary with media exposure, and whether they have information content. Using a sample of European-listed firms reporting under IFRS from 2005 to 2016, we observe diversity in disclosure practices across industries and regions. Although there is an increasing disclosure trend, the level of disclosure of key inputs used to estimate EL (i.e. discount rates and horizons) remains low, with only 35% of firm-years with material EL containing disclosures of both inputs. Furthermore, we test and find that firms facing more media exposure related to environmental matters provide disclosures that are more specific and are more likely to disclose discount rates. Finally, we show that EL disclosure specificity is associated with lower bid-ask spreads following the filing of the annual report and reduced analyst forecast error and dispersion, suggesting specific disclosure reduces information asymmetry.

Suggested Citation

  • Mari Paananen & Emmeli Runesson & Niuosha Samani, 2021. "Time to clean up environmental liabilities reporting: disclosures, media exposure and market implications," Accounting Forum, Taylor & Francis Journals, vol. 45(1), pages 85-116, January.
    • Handle: RePEc:taf:accfor:v:45:y:2021:i:1:p:85-116
    DOI: 10.1080/01559982.2021.1872909
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    Cited by:

    1. Xuan Chen & Liang Zhang, 2022. "Do negative environmental media reports increase environmental information disclosures? A comparative analysis based on political connections and market competition," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2480-2500, September.
    2. Muhammad Farhan Malik & Yuan George Shan & Jamie Yixing Tong, 2022. "Do auditors price litigious tone?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(S1), pages 1715-1760, April.

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