Abstract
Purpose – This paper evaluates the influence of the institutional environment on the extent of social and environmental disclosure of companies from institutionally distant countries. Design/methodology/approach – We analyze basic materials, oil and gas , and public utility companies with shares traded on the Brazilian stock exchange (BM&FBovespa) and Canadian stock exchange (Toronto Stock Exchange) from 2007 to 2015. Quantitative methods are adopted through descriptive statistics and panel data analysis. The econometric modeling considers environmental and social disclosure as dependent variables , independent variables that represent the political, financial, educational and labor systems, and firm size, ROA , and indebtedness as control variables . Findings – In the case of the companies operating in Brazil, the extent of environmental and social disclosure is positively related to the political and labor systems, and negatively related to the financial system. In Canada, disclosure is negatively influenced by the financial system and the education system. The c ontrol variables, which represent characteristics of financial performance, were not significant. Originality/value – The study shows that isomorphic forces operate in the institutional field and affect the adoption of socially responsible behavior. By basing the study on institutionally distinct countries, such as Brazil and Canada, it reinforces the influence of the national business system on the extent of disclosure of environmental and social practices.
Highlights
Institutional theory establishes that there are three sets of factors that shape organizational legitimacy: (1) characteristics of the institutional environment; (2) characteristics and actions of the organization; and (3) the process of legitimation by which the environment constructs its perceptions about the organization (Hybels, 1995)
In Canada, the lowest values are distributed in different years, with the lowest values for the political and labor systems observed in the first years analyzed (2007 and 2008, respectively) and those for the financial and education systems occurring at the end of the period (2013 and 2015, respectively)
The percentage change between the highest and lowest value observed in each of the two countries shows a more homogeneous behavior for Canada, where the variations range between 1.6% and 14.8%
Summary
Institutional theory establishes that there are three sets of factors that shape organizational legitimacy: (1) characteristics of the institutional environment; (2) characteristics and actions of the organization; and (3) the process of legitimation by which the environment constructs its perceptions about the organization (Hybels, 1995). An essential part of the legitimation process is the disclosure of organizational practices to stakeholders. González-Benito and González-Benito (2006) argue that disclosure is important to improve the economic and social context in which the firm operates, and it builds communication channels with government, employees, clients, investors, and other stakeholders. Companies are influenced by the institutional environment when structuring economic, environmental, and social policies and practices (Matten & Moon, 2008). This idea is expanded by Whitley (2003), arguing that the national business system is related to the coherence of the institutional environment, and it helps to define the firm’s strategic elements. Differences between national business systems reflect the degree of cooperation between consumers and suppliers and among competitors; the way in which the firm and controls are structured; the variety of resources and activities integrated through administrative hierarchies; the size of organizational integration; and the longterm interdependence between employees and employers (Brookes, Brewster, & Wood, 2005)
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