Strategic posture, financial performance and environmental disclosure

Vanessa Magness

387 citations0/0 files storedAccounting Auditing & Accountability Journal

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Corporate Social Responsibility Reporting Auditing, Earnings Management, Governance Accounting and Financial Management

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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References

1997Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of who and What Really Counts 1997A RESOURCE-BASED PERSPECTIVE ON CORPORATE ENVIRONMENTAL PERFORMANCE AND PROFITABILITY.1975Organizational Legitimacy: Social Values and Organizational Behavior 1997Disclosure level and the cost of equity capital.1995Corporate social and environmental reporting 1996The Impact of Environmental Management on Firm Performance 1985Data in Search of a Theory: A Critical Examination of the Relationships Among Social Performance, Social Disclosure, and Economic Performance of U.S. Firms 1993Cross-Sectional Determinants of Analyst Ratings of Corporate Disclosures

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2010Corporate social disclosures in the context of national cultures and stakeholder theory 2013Corporate social responsibility disclosures over time: evidence from Malaysia 2014The relationship between corporate environmental performance and environmental disclosure: An empirical study in China 2014Determinants of Social Disclosure Quality in Taiwan: An Application of Stakeholder Theory

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