Determinants of corporate environmental disclosure quality of oil and gas industry in developing countries

Abstract

Purpose -This study aims to identify factors that influence corporate environmental disclosure (CED) quality. Design/methodology/approach -Using content analysis, an index and scoring scheme were applied to annual reports, stand-alone reports and corporate homepages of a sample of 116 oil and gas companies in 19 developing countries (DCs).Findings -The results of this study reveal that out of 12 hypothesized variables, only 5 variables (company size, foreign ownership, profitability, leverage and membership of industry's associations) are positively related to the CED quality.Practical implications -The study has implications in enhancing the understanding of CED practices by oil and gas companies in DCs and the factors that influence the quality of such disclosure. Thus, the results of the study serve as input toward the development of improved regulations concerning CED for the oil and gas industry and provide guidelines to the regulators to make relevant decisions on social and environmental information items to be incorporated in the regulatory standards.Originality/value -The current study attempts to fill the gaps in the literature by examining CED quality (rather than its quantity), concentrating on environmental disclosure made on the three main mediums of reporting. The study also extends previous research of CED by investigating some factors that have the potential to influence the content-quality of environmental disclosure, such as type of company (independent or constrain company) and industry's association membership which have never been examined in the related literature.

Factors Affecting Environmental Disclosure in Companies Listed on the Tokyo Stock Exchange

“…Rahmawati & Budiwati (2018) proved that the EMS has a significant and positive effect on the disclosure of environmental information. This finding is consistent with the finding of Bawono & Hayanto (2015) but different from Ismail et al (2018) who revealed that EMS has no significant effect on environmental disclosure.…”

“…The operational definitions of the variables in this study can be seen in Table 2. Disclosure of environmental information items carried out by companies (Solikhah & Winarsih, 2016) Content analysis (Raar, 2002;Wahyuningrum & Budihardjo, 2018) Return on Equity (ROE) Indicators of corporate financial performance in generating profits using its own capital (Lampe, 2013) x100% (Buallay, 2019;Lampe, 2013) Net Profit Margin (NPM) Profitability ratio to calculate net profit margin of a company (Liu et al, 2013) x 100% (Liu et al, 2013) x 100% (Lampe, 2013) Firm Size (SIZE) Large or small size of a company (Irawati, 2012) LN ( (Ismail et al, 2018) Industry Type (TYPE) Industry type based on its sensitivity to the environment (Djajadikerta & Trireksani, 2012) 1 = high profile 0 = low profile (Wahyuningrum & Budihardjo, 2018) Source: Various references, 2019…”

“…Deswanto & Siregar (2018), Lu & Taylor (2018) proved that the level of profitability does not affect environmental disclosure, whereas Chandok & Singh (2017) and Yanto & Muzzammil (2016) found that profitability has a negative effect on environmental disclosure. On the other hand, research conducted by Ismail et al (2018) found that profitability has a positive effect on environmental disclosure. This result is in line with the finding of Giannarakis (2014).…”

“…If the company is not in good financial condition, this effort to disclose the environment will actually worsen the company's financial condition. Research results of Ahmadi & Bouri (2017), Ismail et al (2018) show that profitability positively influences environmental disclosure.…”

“…Second, research which examines the effect of firm size on environmental disclosure. Ismail et al (2018), Ahmadi & Bouri (2017), Ohidoa, et al, (2016 proved that firm size has a positive effect on environmental disclosure. This result is in line with the finding of Yanto & Muzzammil (2016).…”