The Mediating Role of Environmental Performance on The Relationship Between Corporate Governance Mechanisms and Environmental Disclosure

Razieh Adinehzadeh,Romlah Jaffar,Mara Riduan Che Abdul Rahman,Zaleha Abdul Shukor

doi:10.21315/aamjaf2018.14.1.7

Abstract

Despite the growing number of environmental rules and regulations, there are relatively few studies that consider the whole association between environmental performance, corporate governance and environmental reporting. Therefore, the objectives of the study are to investigate the association between corporate governance and environmental disclosures quality and the mediating role of environmental performance in this relationship. Sample of study consists of 344 companies listed on Bursa Malaysia for the year of 2013. Environmental performance (EP) data were collected from the Malaysia Department of the Environment (DOE). Corporate Governance (CG) data were collected from the annual report of sample companies using corporate governance index based on Malaysian Code on Corporate Governance (MCCG). The results of study show that corporate governance is positively associated with environmental performance and its disclosure. The results also show that environmental performance partially mediates the relationship between corporate governance and environmental disclosure quality. This study serves as a valuable input to top management regarding the importance of corporate governance mechanisms towards the establishment of environmental related policies and strategies that help to improve environmental performance. The findings also provide an impetus for companies to develop specific abilities and resources in prioritised areas that are of a concern to relevant stakeholders.

Highlights

Adverse environmental effect has become matter of great public concern throughout the world over recent decades
The results indicate an adjusted R2 of 20.40%, F = 13.667, and p < 0.000. These findings suggest that companies that have effective corporate governance mechanism are likely to have higher quality environmental disclosure
This study examines the association between corporate governance, environmental performance and environmental disclosure quality of sample companies listed on the Main board of Bursa Malaysia for the year of 2013

Summary

Introduction

Adverse environmental effect has become matter of great public concern throughout the world over recent decades. There have been concerns about the rate at which companies are extracting natural resources for production purpose. As one of the fastest growing economies in the South-East Asia with rich natural resources, faces conflict between economic growth and protection of the environment. In Malaysia, environmental issues include the over-logging of primary forest resulting in the loss of wildlife habitats, soil erosion and the displacement of indigenous communities, air and water pollution from industry and urban transportation and the dumping of hazardous waste (Perry, Singh, & Unies, 2001). There is an increasing expectation of society toward businesses to be more responsible for their activities that harm the environment

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Conclusion