CORPORATE DISCLOSURE OF ENVIRONMENTAL CAPITAL EXPENDITURES: A TEST OF ALTERNATIVE THEORIES

Charles H. Cho, Martin Freedman and Dennis M. Patten
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Charles H. Cho: John Molson School of Business - Concordia University [Montreal]
Martin Freedman: College of Business and Economics - Towson University [Towson, MD, United States] - University System of Maryland
Dennis M. Patten: Department of Accounting - Illinois State University

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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.

Keywords: voluntary disclosure theory; environmental capital expenditure; environmental disclosure; environmental regulation; legitimacy theory; materiality; Toxic Release Inventory; voluntary disclosure theory. (search for similar items in EconPapers)
Date: 2009-05-27
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00459410v1
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Citations: View citations in EconPapers (1)

Published in La place de la dimension européenne dans la Comptabilité Contrôle Audit, May 2009, Strasbourg, France. pp.CD ROM

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00459410

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