Environmental Disclosure, Environmental Performance, and Firm Characteristics: An Analysis of S&P 100 Firms

Abstract

Environmental protection and sustainable development have become an important issue in today's global economy. However, there are only limited requirements for environmental disclosure for publicly-held firms in the United States. This study first measures the environmental disclosure of S&P 100 firms based on keyword frequency count of their 10k reports from 2004 to 2008. It also examines the relationships between environmental disclosure, firm performance and firm characteristics. Our results indicate that environmental disclosure actually has a significant negative impact on firm performance after controlling for firm size, growth and leverage. The results imply that more environmental disclosure may indicate potential environmental problems within the firm and that this may hamper the firm's financial performance. We also find that better-performing firms and highly-leveraged firms tend to have lower environmental disclosures. It implies that these firms may have better compliance with environmental laws and regulations.