Reluctant Disclosure and Transparency: Evidence from Environmental Disclosures

Kira R. Fabrizio () and Eun-Hee Kim ()
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Kira R. Fabrizio: Questrom School of Business, Boston University, Boston, Massachusetts 02215
Eun-Hee Kim: Gabelli School of Business, Fordham University, New York, New York 10023

Organization Science, 2019, vol. 30, issue 6, 1207-1231

Abstract: Strategic management research increasingly examines firms’ strategies for corporate environmental and social disclosures. There are benefits to being perceived as having superior environmental performance, but firms face increasing pressure to provide more complete disclosures, potentially exposing information that will be viewed negatively by external stakeholders. We examine linguistic obfuscation as a means to balance this tension. In particular, we argue that firms may intentionally make their disclosures more complex and harder to understand, thereby blurring the negative content and increasing information processing costs of the recipient. In the context in which an information intermediary actively collects information from firms and evaluates them, we find that firms with unfavorable news to disclose use linguistic obfuscation in information disclosure to manage the tension between the pressure for more complete disclosures and the desire to project a positive image. We further demonstrate that obfuscation lessens the negative impact of reporting negative information on environmental performance ratings given by information intermediaries. This suggests that firms can and do use linguistic tactics to influence environmental ratings.

Keywords: disclosure; obfuscation; ratings; environmental performance; climate change (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ororsc:v:30:y:2019:i:6:p:1207-1231

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