Abstract
AbstractSeveral studies have found a relationship between corporate social and environmental disclosure and firm value (FV) or accounting profitability. Where environmental disclosure has been the focus, though, only single‐country studies have been published, and most of the previous research concerns the developed world. This study examines the association between corporate environmental disclosure (CED) and FV in the Gulf Cooperation Council (GCC) countries, where CED has been increasing from its previous low base. Findings from a multicountry sample of 500 firm‐year observations using a 55‐item unweighted environmental disclosure index suggest that CED is significantly and positively related to FV as measured by Tobin's Q (TBQ). The relationship is robust to using a weighted version of the disclosure index, individual countries and environmental disclosure subindices. Some evidence of a positive relationship between CED and return on assets is also found, but even where statistically significant, the relationship is much weaker than in the case of TBQ. For empirical and theoretical reasons, we recommend that future studies pay greater attention to market‐based proxies, if possible, when investigating the value relevance of CED in both developed and developing countries. Our results suggest that both managers and policymakers in GCC countries should take a positive view of expanded CED.
Highlights
In a world of climate change, natural resource constraints and other socio-environmental pressures, corporate sustainability has been increasingly pushed to the forefront of corporate decision-making and communication
In Saudi Arabia, the Responsible Competitiveness Index was founded in 2010 to help assess businesses’ social and environmental practices (SAGIA, 2015). Such developments have created a context in which firms operating in the Gulf Cooperation Council (GCC) might choose to respond by engaging in further voluntary corporate environmental disclosure (CED) (Broadstock et al, 2018) and so, in turn, reap business gains or at least stave off challenges to their legitimacy – to the benefit of firm value
To the best of our knowledge, this is the first multi-country study of the effect of corporate environmental disclosure (CED) upon firm value (FV). It finds that CED is significantly and positively related to FV as measured by Tobin’s Q (TBQ) in the Gulf Cooperation Council (GCC), an economically and environmentally important set of countries
Summary
In a world of climate change, natural resource constraints and other socio-environmental pressures, corporate sustainability has been increasingly pushed to the forefront of corporate decision-making and communication. Chen, Hung and Wang (2018) examine the effect of the introduction of mandatory CSR reporting in China, and Aureli, Gigli, Medei and Supino (2020) study the impact of the publication of firms’ sustainability or ESG reports Such studies tend not to be concerned with the detail of environmental (or other) disclosure, unlike research that attempts to find a link between the amount and/or quality of disclosure and firm value (or financial performance). In Saudi Arabia, the Responsible Competitiveness Index was founded in 2010 to help assess businesses’ social and environmental practices (SAGIA, 2015) Such developments have created a context in which firms operating in the GCC might choose to respond by engaging in further voluntary CED (Broadstock et al., 2018) and so, in turn, reap business gains or at least stave off challenges to their legitimacy – to the benefit of firm value
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
