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Corporate Disclosure Of Environmental Capital Expenditures: A Test Of Alternative Theories

Author

Listed:
  • Charles H. Cho

    (John Molson School of Business - Concordia University [Montreal, Canada])

  • Martin Freedman

    (College of Business and Economics - Towson University [Towson, MD, United States])

  • Dennis M. Patten

    (Department of Accounting - Illinois State University)

Abstract

In this study, we examine three potential explanations for the corporate choice to disclose environmental capital spending amounts. We investigate, first, whether the disclosure appears to be a function of the materiality of the spending and we find that, for the overwhelming majority of observations, the disclosed amounts are not quantitatively material. This suggests that non-disclosure is likely due to immateriality. We next attempt to differentiate the choice to disclose across voluntary disclosure theory and legitimacy theory arguments. Our findings show that disclosing firms do not exhibit improved subsequent environmental performance relative to non-disclosing companies. Further, controlling for firm size and industry class, we find the choice to disclose is associated with worse environmental performance. Overall, our results suggest that companies use the disclosure of environmental capital spending as a strategic tool to address their exposures to political and regulatory concerns.

Suggested Citation

  • Charles H. Cho & Martin Freedman & Dennis M. Patten, 2009. "Corporate Disclosure Of Environmental Capital Expenditures: A Test Of Alternative Theories," Post-Print halshs-00459410, HAL.
  • Handle: RePEc:hal:journl:halshs-00459410
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00459410
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    References listed on IDEAS

    as
    1. Hughes, Susan B. & Anderson, Allison & Golden, Sarah, 2001. "Corporate environmental disclosures: are they useful in determining environmental performance?," Journal of Accounting and Public Policy, Elsevier, vol. 20(3), pages 217-240.
    2. Patten, Dennis M., 2002. "The relation between environmental performance and environmental disclosure: a research note," Accounting, Organizations and Society, Elsevier, vol. 27(8), pages 763-773, November.
    3. 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.
    4. Ali Fekrat, M. & Inclan, Carla & Petroni, David, 1996. "Corporate environmental disclosures: Competitive disclosure hypothesis using 1991 annual report data," The International Journal of Accounting, Elsevier, vol. 31(2), pages 175-195.
    5. repec:bla:joares:v:18:y:1980:i:2:p:614-622 is not listed on IDEAS
    6. 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.
    7. Thomas P. Lyon & John W. Maxwell, 2011. "Greenwash: Corporate Environmental Disclosure under Threat of Audit," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(1), pages 3-41, March.
    8. Cho, Charles H. & Patten, Dennis M., 2007. "The role of environmental disclosures as tools of legitimacy: A research note," Accounting, Organizations and Society, Elsevier, vol. 32(7-8), pages 639-647.
    9. 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.
    10. Al-Tuwaijri, Sulaiman A. & Christensen, Theodore E. & Hughes, K. II, 2004. "The relations among environmental disclosure, environmental performance, and economic performance: a simultaneous equations approach," Accounting, Organizations and Society, Elsevier, vol. 29(5-6), pages 447-471.
    11. Clarkson, Peter M. & Li, Yue & Richardson, Gordon D. & Vasvari, Florin P., 2008. "Revisiting the relation between environmental performance and environmental disclosure: An empirical analysis," Accounting, Organizations and Society, Elsevier, vol. 33(4-5), pages 303-327.
    12. Verrecchia, Robert E., 1983. "Discretionary disclosure," Journal of Accounting and Economics, Elsevier, vol. 5(1), pages 179-194, April.
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