Signalling and Legitimacy Theories for Explaining Climate Information Disclosure by Russian Companies

Cover Page

Cite item

Full Text

Abstract

This paper studies the factors influencing the level of climate-related disclosure by Russian companies. It has several distinctive features in comparison to previous works: 1) climate change disclosure by Russian companies is studied for the first time; 2) textual analysis is used to evaluate the level of disclosure, and a new Russian glossary on climate change is compiled; 3) a unique set of indicators is used to assess the impact of factors on climate change disclosure. Legitimacy and signalling theories are used to formulate the hypotheses. The sample consists of 47 Russian companies with the largest market capitalization. Their 235 annual and sustainability reports for 2015-2019 are analysed. Using regression analysis, we show that a company’s absolute amount of greenhouse gas emissions, size, industry affiliation, and CDP rating positively affect its level of disclosure about climate change. In contrast, state ownership and a high debt burden have a negative impact. At the same time, the newness of assets, capital expenditures, interest coverage and company growth opportunities have no effect on climate change disclosure. Empirical results have confirmed the applicability of legitimacy theory to the Russian market. The present study will provide investors and regulators with tools for predicting a company’s impact on climate based on its level of climate change disclosure.

About the authors

E. Fedorova

Author for correspondence.
Email: ecolena@mail.ru

M. Martynova

Email: mariamartynova95@gmail.com

References

  1. Kramer K., Ware J. Counting the cost. 2019: A year of climate breakdown. London: Christian Aid; 2019. 24 p. URL: https://www.christianaid.org.uk/sites/default/files/2019-12/Counting-the-cost-2019-report-embargoed-27Dec19.pdf (accessed on 13.03.2021).
  2. Resilience to climate change? The Economist. 2019. URL: https://www.eiu.com/public/topical_report.aspx?campaignid=climatechange2019&zid=climatechange2019&utm_source=blog&utm_medium=one_site&utm_name=climatechange2019&utm_term=announcement&utm_content=bottom_link (accessed on 13.03.2021).
  3. Newlin C., Conley H.A. Climate change will reshape Russia. CSIS: Center for Strategic and International Studies. Jan. 13, 2021. URL: https://www.csis.org/analysis/climate-change-will-reshape-russia (accessed on 13.03.2021).
  4. Mackenzie C., Ascui F. Investor leadership on climate change: An analysis of the investment community’s role on climate change, and snapshot of recent investor activity. New York: UN Global Compact Office; 2009. 40 p. URL: https://www.unpri.org/download?ac=5884 (accessed on 13.03.2021).
  5. Hossain M., Reaz M. The determinants and characteristics of voluntary disclosure by Indian banking companies. Corporate Social Responsibility and Environmental Management. 2007;14(5):274–288. https://doi.org/10.1002/csr.154
  6. Wang K., Sewon O., Claiborne M.C. Determinants and consequences of voluntary disclosure in an emerging market: Evidence from China. Journal of International Accounting, Auditing and Taxation. 2008;17(1):14–30. https://doi.org/10.1016/j.intaccaudtax.2008.01.001
  7. Raffournier B. The determinants of voluntary financial disclosure by Swiss listed companies. European Accounting Review. 1995;4(2):261–280. https://doi.org/10.1080/09638189500000016
  8. Amran A., Ooi S.K., Mydin R.T., Devi S.S. The impact of business strategies on online sustainability disclosures. Business Strategy and the Environment. 2015;24(6):551–564. https://doi.org/10.1002/bse.1837
  9. Braam G.J.M., de Weerd L.U., Hauck M., Huijbregts M.A.J. Determinants of corporate environmental reporting: The importance of environmental performance and assurance. Journal of Cleaner Production. 2016;129:724–734. https://doi.org/10.1016/j.jclepro.2016.03.039
  10. de Faria J.A., Andrade J.C.S., da Silva Gomes S.M. The determinants mostly disclosed by companies that are members of the Carbon Disclosure Project. Mitigation and Adaptation Strategies for Global Change. 2018;23(7):995–1018. https://doi.org/10.1007/s11027-018-9785-0
  11. Patten D.M. Intra-industry environmental disclosures in response to the Alaskan oil spill: A note on legitimacy theory. Accounting, Organizations and Society. 1992;17(5):471–475. https://doi.org/10.1016/0361-3682(92)90042-Q
  12. Deegan C., Rankin M. Do Australian companies report environmental news objectively? An analysis of environmental disclosures by firms prosecuted successfully by the Environmental Protection Authority. Accounting, Auditing & Accountability Journal. 1996;9(2):50–67. https://doi.org/10.1108/09513579610116358
  13. Verrecchia R. Discretionary disclosure. Journal of Accounting and Economics. 1983;5:179–194. https://doi.org/10.1016/0165-4101(83)90011-3
  14. Depoers F., Jeanjean T., Jérôme T. Voluntary disclosure of greenhouse gas emissions: Contrasting the carbon disclosure project and corporate reports. Journal of Business Ethics. 2016;134(3):445–461. https://doi.org/10.1007/s10551-014-2432-0
  15. Broadstock D.C., Collins A., Hunt L.C., Vergos K. Voluntary disclosure, greenhouse gas emissions and business performance: Assessing the first decade of reporting. The British Accounting Review. 2018;50(1):48–59. https://doi.org/10.1016/j.bar.2017.02.002
  16. Climate reports. Key findings. United Nations. 2020. URL: https://www.un.org/en/climatechange/science/key-findings (accessed on 13.03.2021).
  17. Eng L.L., Mak Y.T. Corporate governance and voluntary disclosure. Journal of Accounting and Public Policy. 2003;22(4):325–345. https://doi.org/10.1016/S0278-4254(03)00037-1
  18. Cheng E.C.M., Courtenay S.M. Board composition, regulatory regime and voluntary disclosure. The International Journal of Accounting. 2006;41(3):262–289. https://doi.org/10.1016/j.intacc.2006.07.001
  19. Stanny E., Ely K. Corporate environmental disclosures about the effects of climate change. Corporate Social Responsibility and Environmental Management. 2008;15(6):338–348. https://doi.org/10.1002/csr.175
  20. Luo L., Lan Y.-C., Tang Q. Corporate incentives to disclose carbon information: Evidence from the CDP Global 500 report. Journal of International Financial Management & Accounting. 2012;23(2):93–120. https://doi.org/10.1111/j.1467-646X.2012.01055.x
  21. Deegan C. Introduction: The legitimising effect of social and environmental disclosures – a theoretical foundation. Accounting, Auditing & Accountability Journal. 2002;15(3):282–311. https://doi.org/10.1108/09513570210435852
  22. Clarkson P.M., Li Y., Richardson G.D., Vasvari F.P. Revisiting the relation between environmental performance and environmental disclosure: An empirical analysis. Accounting, Organizations and Society. 2008;33(4–5):303–327. https://doi.org/10.1016/j.aos.2007.05.003
  23. Kalu J.U., Buang A., Aliagha G.U. Determinants of voluntary carbon disclosure in the corporate real estate sector of Malaysia. Journal of Environmental Management. 2016;182:519–524. https://doi.org/10.1016/j.jenvman.2016.08.011
  24. Clarkson P.M., Overell M.B., Chapple L. Environmental reporting and its relation to corporate environmental performance. Abacus. 2011;47(1):27–60. https://doi.org/10.1111/j.1467-6281.2011.00330.x
  25. Barth M.E., Kasznik R. Share repurchases and intangible assets. Journal of Accounting and Economics. 1999;28(2):211–241. https://doi.org/10.1016/S0165-4101(99)00020-8
  26. Verrecchia R.E. Essays on disclosure. Journal of Accounting and Economics. 2001;32(1–3):97–180. https://doi.org/10.1016/S0165-4101(01)00025-8
  27. Freedman M., Jaggi B. Global warming, commitment to the Kyoto protocol, and accounting disclosures by the largest global public firms from polluting industries. The International Journal of Accounting. 2005;40(3):215–232. https://doi.org/10.1016/j.intacc.2005.06.004
  28. Luo L., Tang Q., Lan Y. Comparison of propensity for carbon disclosure between developing and developed countries. Accounting Research Journal. 2013;26(1):6–34. https://doi.org/10.1108/ARJ-04-2012-0024
  29. Glossary of terms. IPCC. 2018. URL: https://www.ipcc.ch/site/assets/uploads/2018/03/wg2TARannexB.pdf (accessed on 13.03.2021).
  30. Kokorin А.О., Lipka О.N., Sulyandziga R.V. Climate change: The glossary of terms used by UN FCCC. Moscow: WWF Russia; 2015. 92 p. URL: https://wwf.ru/upload/iblock/509/wwf_glossary_web.pdf (accessed on 13.03.2021). (In Russ.).
  31. Glossary of terms and definitions. World Bank Climate Change Knowledge Portal. 2018. URL: https://climateknowledgeportal.worldbank.org/themes/custom/wb_cckp/resources/data/CCKP_Glossary_Oct_2018.pdf (accessed on 13.03.2021).
  32. Fedorova E., Grishchenko Yu., Demin I., Chernova E. Assessment of the impact of the level of disclosure of mandatory non-financial information in public annual reports on the investment attractiveness of a company. Korporativnye finansy = Journal of Corporate Finance Research. 2020;14(2):22–34. https://doi.org/10.17323/j.jcfr.2073-0438.14.2.2020.22-34
  33. Dawkins C., Fraas J.W. Coming clean: The impact of environmental performance and visibility on corporate climate change disclosure. Journal of Business Ethics. 2011;100(2):303–322. https://doi.org/10.1007/s10551-010-0681-0
  34. Lu Y., Abeysekera I. Stakeholders’ power, corporate characteristics, and social and environmental disclosure: Evidence from China. Journal of Cleaner Production. 2014;64:426–436. https://doi.org/10.1016/j.jclepro.2013.10.005
  35. Ilina Y.B., Berezinets I.V., Orlova A.V. Information disclosure index: The relationship with financial performance. Korporativnye finansy = Journal of Corporate Finance Research. 2009;3(2):28–39. (In Russ.). https://doi.org/10.17323/j.jcfr.2073-0438.3.2.2009.28-39

Supplementary files

Supplementary Files
Action
1. JATS XML
Download

Copyright (c) 2021 Fedorova E., Martynova M.

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.