How Does Environmental Accounting Information Influence Attention and Investment?

Abstract:     
Purpose: Environmental consequences increasingly influence management strategy and choice. This study investigates the effects on attention and investment of: (a) incorporating environmental data into a balanced scorecard (BSC), called the sustainability balanced score card (SBSC), and, (b) the organization of environmental accounting information.

Design/method/approach: In a between-participant design, participants (n ≈ 95) chose from among two investments using BSCs. Participants were randomly assigned to one of three conditions: (a) no environmental data (control or BSC condition), (b) environmental data embedded within the traditional BSC (four-perspective SBSC) or (c) environmental data added to a BSC as a standalone fifth perspective (five-perspective SBSC).

Findings: Environmentally friendly investment was greater with the four-perspective SBSC than the traditional BSC. In addition, participants were most efficient, i.e., spent the least total time, and least time per data element examined, with the four-perspective SBSC. Finally, the time spent examining, and decision weight given to, environmental data were uncorrelated.

Research limitations/implications: Professional managers and accountants may have greater knowledge of environmental metrics than do students, who are the participants in this study; greater knowledge of environmental metrics may lessen the extent of display effects on judgments; hence, the results may not generalize to knowledgeable professionals. Future research can test this speculation by exploring the influence of knowledge on judgments in this context.

Practical implications: The form (i.e., organization) of environmental accounting data changed the allocation of attention while the presence of environmental accounting data changed participants’ investments; hence, both the presence, and form, of environmental accounting information matters.

Originality/value: This study is among the first to show differing influences from both the presence and organization of environmental accounting data on attention and investment.

Category: Research paper.

Number of Pages in PDF File: 44

Keywords: Sustainability Balanced Scorecard, Environmental Accounting, Ecological Accounting, Investment Decision Making, Decision Making Strategies, Data Quality

JEL Classification: M46

working papers series