Quantity versus quality: the impact of environmental disclosures on the reputations of UK Plcs

Abstract

The theoretical framework of this paper integrates quality-signalling theory and the resource based view of the firm to test the differential effects of the quantity and quality of environmental disclosures on the firm's environmental reputation.Uniquely, the study uses a quality-adjusted method of content analysis, so that sentences are not merely counted but also weighted to reflect their likely significance.Investments in research and development and diversification, as potential methods of enhancing of environmental reputation, are also considered. In doing so the paper complements and extends the work of Toms (2002). The results confirm the framework and models tested in the original paper on more recent data and also suggest that quality of environmental disclosure rather than mere quantity has a stronger effect on the creation of environmental reputation amongst executive and investor stakeholder groups. Research and development expenditure, and under certain circumstances, diversification, also add to reputation.2

The institutionalisation of mining company sustainability disclosures

“…This is consistent with both survey and empirical findings showing that large companies are more likely to disclose sustainability information (Gamble et al, 1996;Neu et al, 1996;Wong and Fryxell, 2004;Hasseldine et al, 2005;KPMG, 2011). However, if sustainability disclosure has reached the level of maturity associated with professionalization and the view that disclosure is the right thing to do, then it would be expected that all companies, including large and small companies, would undertake equal amounts of sustainability disclosure.…”

Corporate Governance and Corporate Social Responsibility Disclosure: Evidence from the US Banking Sector

“…The second approach is to measure the disclosure content using word or page counts (Li et al, 2008;Kothari et al, 2009;Haniffa and Cooke, 2005). However, such quantity scores say little about the quality and comprehensiveness of the disclosure (Hasseldine et al, 2005). If, as previously discussed, CEOs might be incentivized to use CSR disclosure to maximize media coverage while at the same time trying to limit stakeholder scrutiny of their policies, measuring the quality and comprehensiveness rather than the quantity of CSR disclosure is particularly important.…”

“…Previous studies tend to suggest that alpha values of 75% or above are considered generally acceptable (Hasseldine et al, 2005;Holder-Webb et al, 2009). …”

“…Although reliability testing cannot provide full assurance of scoring objectivity (Linsley, Shrives and Crumpton, 2006), Kripendroff's alpha is commonly used to assess the level of agreement between two or more coders (Newson and Deggan, 2002;Hasseldine et al, 2005;Holder-Webb et al, 2009). …”

“…Li, Pike and Haniffa, 2008;Kothari, Xu and Short, 2009;Haniffa and Cooke, 2005), we use content analysis to measure the comprehensiveness and quality of disclosed information in banks' annual reports. The rationale for this is that the quality of disclosure is more essential than the quantity (Hasseldine, Salama and Toms, 2005;Toms, 2002). In line with definitions, frameworks and methods employed in the mainstream CSR literature (Gray et al, 1995a(Gray et al, , 1995bHaniffa and Cooke, 2005;Branco and Rodrigues, 2006;Scholtens, 2008;HolderWebb, Cohen, Nath and Wood, 2009), we develop a CSR disclosure measure based on the content of four CSR categories − community involvement, environment, employees, and product and customer service quality − and score the content of information in each of the categories based on the existence and comprehensiveness of information disclosed.…”