Firms' Disclosure Reactions to Major Social Incidents: Australian Evidence

Abstract

This study examines the reaction of Australian firms, in terms of annual report disclosure, to five major social incidents. These incidents had significant implications for either the environment, or the safety of both employees and community members. The incidents reviewed are the Exxon Valdez and Bhopal disasters; the Moura Mine disaster in Queensland; an oil spill, caused by the Iron Baron, off the coast of Tasmania; and the Kirki oil spill, off the coast of Western Australia.Studies of this nature have previously been restricted to the examination of US company disclosure (e.g. Patten 1992; Blacconiere and Patten 1994), or the stock market reaction to such events in the US (e.g. Blacconiere and Patten 1994). The results of this study indicate that, following four of the incidents, sample firms operating in the affected industries provided more social information in their annual reports than they did prior to the incidents occurrence. These results support a view that organizations utilize their annual report as a means of influencing society's perception of their operations, and as a means of legitimizing their ongoing existence. The strategic nature of voluntary annual report disclosures is emphasized.

Developments in non-mandatory disclosures in annual reports of companies: a case study

“…Gray, Owen and Adams (1996, p.45) point out "information is a major element that can be employed by the organization to manage (or manipulate) the stakeholder in order to gain their support and approval, or to distract their opposition and disapproval." Deegan, Rankin and Voght (2000) conform the notion that legitimacy is about disclosure.…”

News Media Coverage of Corporate Tax Avoidance and Corporate Tax Reporting

“…A commonly identified trend is a significantly higher level of incident-related disclosure in terms of the number of words and positive tones in the contexts after media exposure (Deegan and Rankin, 1996;Darrell and Schwartz, 1997;Brown and Deegan, 1998;Neu et al, 1998;Bewley and Li, 2000;Deegan et al, 2000;2002;Islam and Deegan, 2010). It supports the assertion that "if there is increased community concern about environmental issues, driven by increased media attention, then the increased concern should be matched by increased disclosures."…”

“…More significantly, they highlight that corporate tax reporting is, by its nature, different from other types of corporate social and environmental disclosure. The commonly identified positive relationship between the level of media exposure and the extent of disclosure (Deegan and Rankin, 1996;Darrell and Schwartz, 1997;Brown and Deegan, 1998;Neu et al, 1998;Bewley and Li, 2000;Deegan et al, 2000;2002;Islam and Deegan, 2010) is not found in the case of corporate tax avoidance. It appears that a "do-not-respond" strategy (Benoit, 1997;Elsbach et al,1998;van Staden, 2006) is more predominant than "over-disclosure" strategies (Blank 2008;2009), especially when the media scrutiny of corporate tax reaches the maximum level.…”

Environmental Life Cycle Costs in the Australian Food Packaging Supply Chain

“…Findings from these studies (Deegan and Rankin 1996;Deegan and Rankin 1997;Deegan et al 2000;O'Donovan 2000;Wilmshurst and Frost 2000;O'Donovan 2002) suggest that companies will generally only report information that is favourable to their corporate image, that there is an increase in the level of reporting following major incidents and/or companies will report information to either gain, maintain or repair their legitimacy.…”

“…Studies on envirormiental reporting have focused upon companies operating in the mining, oil exploration, chemical and forestry sectors (Neu et al 1998;Parker 1998;Deegan et al 2000) and the pharmaceutical sector (Schaper 2001;Schaper 2002) has also been investigated. Other studies (Guthrie and Parker 1990;Hackston and Milne 1996;Frost and Wilmshurst 2000;Wilmshurst and Frost 2000;Wilmshurst and Frost 2001) have concentrated upon the top 50, 100 or 500 companies on specific national stock exchanges for their sample population and have generally used mailed-survey questiormaires to collect the data.…”