Environmental disclosures and public policy pressure

Abstract

Disclosing environmental information in annual reports may affect the perceptions of an enterprise's earnings and cash flows. Our study investigates the changes in the levels of environmental disclosures subsequent to the 1989 Alaskan Exxon Valdez oil spill in four industries including the oil industry. Environmental disclosure data were obtained for 53 firms, using a computerized search of corporate annual reports for years 1988, 1989, and 1990. Our study uses two methods of enumeration, a quantity assessment and a quality assessment. The objective of our study is to determine if there are significant positive differences between years. Findings suggest significant positive differences in the levels of environmental disclosures from year 1988 to 1989 and from year 1989 to 1990, using both assessment measures. These findings lend support to environmental disclosures being time- or event-specific, and made in the firm's self-interest in response to public policy pressure.