Does ownership type affect environmental disclosure?

Ece Acar,Yasemin Zengin-Karaibrahimoglu,Kıymet Tunca Çalıyurt

doi:10.1108/ijccsm-02-2020-0016

Abstract

PurposeIn recent years, firms tend to direct their attention in communicating their environmental actions with their stakeholders. However, the level of environmental disclosers varies significantly among firms. This paper aims to explain the variation in environmental disclosure of firms based on their ownership type, namely – state ownership and institutional ownership. The study further aims to understand whether and how the relationship between ownership structure and environmental disclosure changes regarding countries’ development levels.Design/methodology/approachThis paper uses a sample of 27,847 firm-year observations from 72 countries/economic districts between the years 2002 and 2017 and regression analysis to test how the relationship between different ownership structures and environmental disclosure and whether this relation is conditional on countries’ development levels.FindingsThis study finds that firms with higher state ownership have higher environmental disclosures and higher institutional ownership has a negative effect on environmental disclosures. Furthermore, this paper also documents that firms with higher state ownership and operating in developed countries have incrementally higher environmental disclosure, relative to firms operating in developing countries.Research limitations/implicationsThe study has limitations that would provide possible starting points for further research. The first limitation is related to the environmental disclosure measure, which reflects the level of environmental disclosure of firms based on their disclosure information given in the Thomson Reuters, Asset4 database. A more refined measure can be constructed using hand-collected data based on linguistic analysis, which may reflect not only the level of the disclosure but also the quality of the environmental disclosure. The second limitation is the limited focus of the study toward state and institutional shareholding. Therefore, future research may consider examining the different types of ownership such as family ownership.Practical implicationsThe findings of the study may help policymakers and regulators to consider the potential impact of various ownership types on environmental disclosures. Also, given the impact of countries’ development levels, regulators should consider that a one-size-fits-all is not applicable in environmental disclosures. Therefore, each country should consider the institutional dynamics of their operating environment to set appropriate regulations to enhance environmental disclosures.Social implicationsFrom a social perspective, the findings indicate that firms’ stakeholder engagement via environmental disclosures depends on the type of the controlling shareholders.Originality/valueThis study contributes to the literature by developing a new construct for environmental disclosure based on Biodiversity, Climate Change, Environmental Investments and Spill Impact Reduction performance measures. Further, grounding on legitimacy and stakeholder theories, this study shows the influence of ownership type on environmental disclosures and how this effect changes in accordance with the countries’ development.

Highlights

In the past two decades, corporations have been exposed to extensive pressure from society and regulators (e.g. Carbon Disclosure Project (CDP), the Kyoto Protocol of the UnitedNations Framework Convention on Climate Change) for higher accountability on climate change and environmental issues
Research model To examine H1, voluntary environmental disclosure on climate change, biodiversity, environmental investments, and spill impact reduction is higher for firms with higher state ownership, and H2, voluntary environmental disclosure on climate change, biodiversity, environmental risk, and spill impact reduction is lower for firms with higher institutional ownership, we use the equation (1): LnðEnvDisclosureÞ 1⁄4 a þ b1 lnðOwnð%ÞÞ þ b2 lnTotalAssets þ b3 lnðDebttoCapitalÞ
Using the assumptions of legitimacy theory and stakeholder theory, we have tried to extend the previous literature on the relationship between voluntary environmental disclosure level and ownership structure considering institutional ownership and state ownership

Summary

Introduction

In the past two decades, corporations have been exposed to extensive pressure from society and regulators (e.g. Carbon Disclosure Project (CDP), the Kyoto Protocol of the UnitedNations Framework Convention on Climate Change) for higher accountability on climate change and environmental issues. As a consequence of these worldwide calls, firms’ sensitivity and awareness of environmental issues have increased significantly. Given that firms’ reputation and existence in the market at stake (Dintimala and Amril, 2018), in addition to increasing sensitivity and awareness, to provide a positive signal on the market, firms direct their attention in communicating their environmental actions with their stakeholders. This study aims to fill the gap in the literature by analyzing the relationship between different ownership structures and firms’ climate change, biodiversity, environmental investments, and spill impact reduction disclosures. This is important because it shows whether institutional and state ownerships could act as a stimulating driver for firms’ disclosure policy

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