The impact of voluntary environmental disclosure on firm value: Does organizational visibility play a mediation role?

Abstract

The current study investigates whether organizational visibility, that is the extent to which analysts follow, and institutions hold, a firm's stock (Baker, Powell, & Weaver, , p. 47), may explain the mechanism through which corporate environmental disclosure (CED) affects firm value. It explores whether CED impacts organizational visibility, and if so, whether firm value increases in organizational visibility, after accounting for greenhouse gas emissions intensity (GHG) as well as several firm‐level and country‐level controls. It utilizes a sample of S&P Global 1200 companies from 2010 to 2015. Using structural equation modeling to address the complex interrelationships between the variables of interest and employing Full Information Maximum Likelihood regression method, the findings show that organizational visibility does not play a statistically significant mediation role on the relationship between CED and firm value. However, organizational visibility is significantly associated with both CED and firm value, which indicates that failing to control for organizational visibility when examining the relationship between CED and firm value could yield misleading results. The results also show that prior CED significantly reduces current GHG. Interestingly, analyst coverage is found to play a full mediation role on the relationship between institutional ownership and firm value as well as a partial mediation role on the relationship between prior GHG and firm value. Thus, this study suggests that corporate management lobby financial analysts and educate them about their firms' environmental disclosure and performance to improve their information set and increase firm visibility and value.

Environmental Initiatives and Disclosures by Large companies: The Views of Investors

“…This implies that investors considered the costs of producing quality environmental disclosures (such as the amount and nature (toxic/non-toxic) of waste, disposal methods, measurable targets and performance against the targets). This finding is consistent with the conclusion of the prior works that examined the capital market and publicly available corporate reports and suggested that environmental initiatives/ disclosures has a positive association with firm size that contributed to organisational financial attributes and visibility (Hassan, 2018;Ahmadi & Bouri, 2017;Yu et. al., 2017).…”

Beyond symbolic and substantive: Strategic disclosure of corporate environmental information in China

“…A lack of sufficient information prevents individuals or NGOs from conducting environmental lawsuits (Lyon et al, ). PDC companies have more organizational visibility (L. W. Lin, ), and more visible firms attract more attention and pressure from stakeholders (Hassan, ). Therefore, EID with additional information regarding costs, production processes, and environmental activities may be available to the public and rivals, which leads to companies fearing misrepresentation and makes them reluctant to disclose potentially harmful environmental information (Solomon & Lewis, ).…”

Does it pay to be green? A disaggregated analysis of U.S. firms with green patents

“…On the other hand, the case of U.S. firms is chosen because the United States is the largest economy (with a GDP of $18.5 trillion in 2016) and the biggest stock market (with a market capitalization of $27.3 trillion in 2016) in the world. Furthermore, previous findings for U.S. firms are still inconclusive regarding the relationship between environmental and financial performance (e.g., Clarkson, Li, Richardson, & Vasvari, ; Hassan, ; King & Lenox, ; Konar & Cohen, ; Lucas & Noordewier, ; Nollet, Filis, & Mitrokostas, ). For these reasons, the data sample investigated in this study is composed of 361 U.S. firms that possess at least one green patent over the 2007–2016 period, according to the U.S. Patent and Trademark Office (USPTO).…”