Voluntary Environmental Disclosures in 10-Ks and Environmental Reports: Determinants and Relationship to Firm Risk Premium

54 Pages Posted: 27 Oct 2013

See all articles by Elizabeth Connors

Elizabeth Connors

Michigan State University

Holly H. Johnston

University of Massachusetts Boston

Date Written: October 27, 2013

Abstract

Recent studies have examined the motivations of firm voluntary disclosure of environmental and social responsibility performance stand-alone reports. We extend this literature by examining firm voluntary disclosure of environmental performance in stand-alone reports (CERs) and 10-Ks. We model disclosure in these reports as jointly determined, endogenous functions of private information regarding environmental performance and demand for disclosure through shareholder resolutions. When voluntary and mandatory environmental performance information is subsequently made public, we examine the relationship between the level of disclosure and firm risk premium. Our results relating to firms in the chemicals and electric utility industries show a positive association between the levels of voluntary disclosure in CERs and 10-Ks. There is a negative relationship between emissions and CER disclosure. Environmental disclosure related shareholder resolutions are associated with higher disclosures in both types of reports. Finally, the association between disclosure and firm risk premium is dependent on industry sector.

Keywords: environmental performance, voluntary disclosure, cost of equity capital, risk premium, shareholder resolutions

Suggested Citation

Connors, Elizabeth and Johnston, Holly H., Voluntary Environmental Disclosures in 10-Ks and Environmental Reports: Determinants and Relationship to Firm Risk Premium (October 27, 2013). Available at SSRN: https://ssrn.com/abstract=2345964 or http://dx.doi.org/10.2139/ssrn.2345964

Elizabeth Connors (Contact Author)

Michigan State University ( email )

Agriculture Hall
East Lansing, MI 48824-1122
United States

Holly H. Johnston

University of Massachusetts Boston ( email )

100 Morrissey Blvd
Boston, MA 02125
United States

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