Mandatory environmental disclosures in a legitimacy theory context
Accounting, Auditing & Accountability Journal
ISSN: 0951-3574
Article publication date: 1 August 2005
Abstract
Purpose
The purpose of this study is to examine the relationship between mandatory environmental performance disclosure and subsequent environmental regulatory performance.
Design/methodology/approach
Using legitimacy theory as the interpretive lens, regulatory non‐compliance disclosures threaten organizational legitimacy and non‐compliant firms are expected to respond to these threats. The potential effectiveness of different legitimation strategies for reducing these threats is evaluated.
Findings
Regression analysis shows a negative correlation between the mandatory disclosure of environmental legal sanctions and subsequent regulatory violations using firms in the US oil refining industry. These results are interpreted as demonstrating that subsequent regulatory compliance is a tactic employed by managers to minimize the delegitimizing effect of organizational impropriety revealed by mandatory accounting disclosures.
Practical implications
Implications for practice include linking financial reporting to environmental performance. This link gains greater importance as concern about the environmental effects of business operations becomes more acute within the investor, regulatory, and public interest arenas.
Originality/value
The paper makes original contributions to research on mandatory environmental disclosures that are embedded in US financial reporting. In addition, a conception of legitimacy theory that is broader than previously relied upon in accounting research literature is reviewed. The study examines a single industry within a single country. Further research may determine whether similar relationships are observed in other industries, and whether equivalent relationships can be examined in international settings. In addition, the possibilities and limits of regulatory compliance as a measure of environmental performance, and of environmental accounting as a policy tool in the governance of the commons are discussed.
Keywords
Citation
Luft Mobus, J. (2005), "Mandatory environmental disclosures in a legitimacy theory context", Accounting, Auditing & Accountability Journal, Vol. 18 No. 4, pp. 492-517. https://doi.org/10.1108/09513570510609333
Publisher
:Emerald Group Publishing Limited
Copyright © 2005, Emerald Group Publishing Limited