Discretionary Compliance with Mandatory Environmental Disclosures: Evidence from SEC Filings

Journal of Accounting and Public Policy, Forthcoming

45 Pages Posted: 10 Dec 2012

See all articles by Gary F. Peters

Gary F. Peters

University of Arkansas at Fayetteville

Andrea Romi

Texas Tech University - Area of Accounting

Date Written: October 16, 2012

Abstract

We examine the determinants of adherence to U.S. Securities and Exchange Commission (SEC) mandated disclosures of environmental sanctions. Our sample includes non-superfund U.S. Environmental Protection Agency (EPA) sanctions between 1996 and 2005. Our results suggest that firms are more likely to provide sanction disclosures if they operate in environmentally sensitive industries, are subject to larger penalties and are voluntarily participating in a supplemental environmental project. Our results also suggest that firms are less likely to disclose sanctions involving judicial proceedings. Overall, we find that voluntary disclosure incentives impact compliance with mandatory reporting requirements. Although incentives exist for firms to comply with mandatory disclosures, our results suggest that increases in mandatory environmental accounting disclosures may not be effective under the current regulatory system despite the use of bright-line materiality thresholds. Our study contributes to the current and ongoing debate about the role and effectiveness of environmental risk disclosure mandates in providing information to the marketplace, as well as “mandated disclosure” rules in general. The value attributed to current and potential environmental disclosure regulations cannot be thoroughly understood without examining disclosure compliance with existing regulations. From an environmental and sustainability disclosure perspective, our findings are particularly germane since these disclosures focus on risks, liabilities, or other reputational shortcomings of the firm.

Keywords: environmental disclosure, environmental sanctions, mandatory disclosure, voluntary disclosure

Suggested Citation

Peters, Gary F. and Romi, Andrea, Discretionary Compliance with Mandatory Environmental Disclosures: Evidence from SEC Filings (October 16, 2012). Journal of Accounting and Public Policy, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2187485

Gary F. Peters

University of Arkansas at Fayetteville ( email )

Sam M. Walton College of Business
Department of Accounting
Fayetteville, AR 72701

Andrea Romi (Contact Author)

Texas Tech University - Area of Accounting ( email )

P.O. Box 42101
Lubbock, TX 79409
United States

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