روابط میان افشای محیطی، عملکرد محیطی و عملکرد اقتصادی : رویکرد معادلات همزمان

This study provides an integrated analysis of the interrelations among (1) environmental disclosure, (2) environmental performance, and (3) economic performance. Based on the argument that management's (unobservable) overall strategy affects each of these corporate responsibilities, we conjecture that prior literature's mixed results describing their interrelations may be attributable to the fact that researchers have not considered these functions to be jointly determined. After endogenizing these corporate functions in simultaneous equations models, we obtain results that suggest “good” environmental performance is significantly associated with “good” economic performance, and also with more extensive quantifiable environmental disclosures of specific pollution measures and occurrences.

As managers scramble to compete in the global economy, they must do so within societal constraints characterized by ever-increasing environmental accountability. This accountability includes heightened public scrutiny of both the firm's environmental performance and its public disclosure of that performance. These elements of corporate environmental accountability jointly impact the firm's profitability and the value of its common equity. This study provides an integrated analysis of how management's overall strategy jointly affects (1) environmental disclosure, (2) environmental performance, and (3) economic performance. Understanding these interrelations is of increasing interest to both internal and external stakeholders in an era in which corporate environmental costs have become a significant business expense.1 Prior empirical and social-responsibility research on the relations among environmental performance, environmental disclosure, and economic performance has, in general, considered the strength of pair-wise associations between two of these three factors, while not addressing the third. Academic researchers from management, finance, and economic disciplines have focused on the environmental-performance–economic-performance relation and the root question: Is going green good for profits? Meanwhile, accounting researchers have concentrated on the adequacy of environmental disclosure in financial reporting and its value relevance to investors: Do green disclosures adequately represent the firm's exposure to future green regulation? And because these disclosures are largely voluntary, what factors determine their shade of green? While this research has advanced our knowledge in specific settings,2 no study has attempted to examine environmental performance, environmental disclosure, and economic performance within a single inclusive model. We propose a holistic approach to examine collectively the relations among the firm's (1) environmental performance, (2) environmental disclosure, and (3) economic performance, using a conceptual framework first suggested by Ullmann (1985). Ullmann presents a descriptive analysis of prior social-responsibility studies that, in aggregate, report mixed empirical results of pair-wise associations between environmental performance and economic performance, between environmental performance and environmental disclosure, and between environmental disclosure and economic performance.3 Ullmann posits that the inconsistent findings characteristic of these pair-wise studies reflect a common omitted variable—an inclusive management strategy. In executing the corporation's strategic business plan, management implements policies and initiates decisions that simultaneously affect the firm's environmental performance, environmental disclosure, and economic performance. If these corporate functions are endogenously determined, then piecemeal Ordinary Least Squares (OLS) estimation of pair-wise relations among these three functions will produce biased and inconsistent results. While accepting Ullmann's premise that earlier research models used to explore these relations may have been mis-specified, we consider incorporating an unobservable managerial strategy into an empirical model to be problematic. Instead, we implement Ullmann's conceptual framework by explicitly treating environmental performance, environmental disclosure, and economic performance as endogenous variables, jointly determined by the firm's strategic management process. In doing so, we advance the following research questions: First, how are the firm's environmental performance, environmental disclosure, and economic performance interrelated after the endogeneity of these three corporate functions is explicitly considered? Second, does joint estimation of these relations significantly differ from independent OLS estimation? If so, significant methodological differences in estimating the coefficients of the endogenous variables may be due to bias in the OLS estimator. Documentation of such bias has implications for both interpreting prior research and planning future research designs. To address these questions, we first specify environmental performance, environmental disclosure, and economic performance in three multivariate equations in which at least one of these functions is an explanatory variable of another. While our empirical proxies for economic performance are market-based and our measure for environmental performance is a nonfinancial ratio based on the relative quantity of hazardous waste recycled, we feel that it is important to qualify our measure of environmental disclosure and distinguish it from its more generic connotation. Within the context of this study, environmental disclosure is the disclosure of specific pollution measures and occurrences (toxic waste emissions, oil spills, Superfund sites, etc.) that an investor might find useful in estimating future cash flows. This definitional constraint focuses on the disclosure of cost drivers of future environmental costs and intentionally excludes the “greenwash” commonly found in annual financial reports. Using a cross-sectional sample of 198 US “Standard & Poors 500” firms, we first ensure that all sample firms exceed a minimum threshold for exposure to future environmental costs. We then compare independent OLS estimation of the relations among the three corporate functions under investigation, with joint estimation using two-stage least squares (2SLS) and three-stage least squares (3SLS) simultaneous equations models. After controlling for endogeneity, we observe that “good” environmental performance is positively associated with “good” economic performance, and also with more extensive quantifiable environmental disclosures of specific pollution measures and occurrences. This research contributes to our understanding of how societal concerns for the environment affect corporate strategy and, ultimately, firm value. First, we recognize the endogeneity of the firm's environmental performance, environmental disclosure, and economic performance, and find that this research-design consideration significantly affects the statistical significance of estimated interrelations. Second, the significantly positive relation observed between environmental performance and economic performance suggests that managers should change their strategic outlook regarding a firm's environmental performance, from fixating on the deadweight costs of ex post regulatory compliance, to focusing on the ex ante opportunity costs represented by environmental pollution. Third, we find that good environmental performers disclose (within the context of our definition of environmental disclosure) more pollution-related environmental information than do poor performers, which is consistent with discretionary disclosure theory's “good news” explanation. Fourth, while providing additional evidence regarding the determinants of environmental performance, environmental disclosure, and economic performance, this research introduces new empirical proxies for environmental performance and environmental disclosure. Finally, this study spans the research agendas of multiple academic disciplines and contributes to a growing body of interdisciplinary environmental knowledge. The remainder of this study proceeds as follows: the following reviews the pertinent literature and frames the testable hypotheses; the next introduces the structural equations in the simultaneous equations models and describes the variables along with the data sources; next, provides the empirical results; and the final section summarizes the study's conclusions, implications, and limitations.

This study investigates the relations among economic performance, environmental performance, and environmental disclosure, after explicitly considering that these three corporate functions are jointly determined. This specification is consistent with Ullmann's (1985) argument that the execution of each of these corporate responsibilities is determined by management's (unobservable) overall strategy. We, like Ullmann, conjecture that the mixed results reported by prior environmental empirical research may have arisen because researchers did not allow for these constructs to be endogeneous. By explicitly controlling for endogeneity in the study's research design, this research contributes to our understanding of how societal concerns for the environment affect corporate strategy and, ultimately, firm value. A more detailed description of how this study contributes to the current stream of environmental research follows. First, we find that allowing for the potential endogeneity associated with specifying our three corporate functions—economic performance, environmental performance, and environmental disclosure—makes a statistically significant difference in estimating their interrelations. Finding our proxy for environmental performance to be endogeneous, we provide evidence of the bias associated with OLS estimation under such conditions by using a system of simultaneous equations. The OLS results suggest that only the economic-performance–environmental-performance relation of the potential interrelations among economic performance, environmental performance, and environmental disclosure is statistically significant in our cross-sectional sample. However, by using a joint-estimation research design, we also observe a significantly positive relation between good environmental performance and more extensive quantifiable disclosure of environmental information. The contrast between independently estimated OLS results and those obtained through joint determination highlight the importance of controlling for endogeneity in the research design. Second, the significantly positive relation observed between environmental performance and economic performance is consistent with Michael Porter's theoretical argument that innovative solutions to reduce the inefficiencies associated with pollution promote both environmentalism and industrial competitiveness simultaneously. Porter & van der Linde, 1995a and Porter & van der Linde, 1996b reject the economic-ecological tradeoff paradigm because it assumes that everything except regulation (i.e., technology, products, processes, and customer needs) is fixed.25 They argue that environmental pollution represents resources that have been used incompletely, inefficiently, or ineffectively. Our results, consistent with this argument, suggest that managers should change their strategic outlook regarding a firm's environmental performance, from fixating on the deadweight costs of ex post regulatory compliance to focusing on the ex ante opportunity costs represented by environmental pollution.26 Our finding that good environmental performance and economic profitability go hand-in-hand, in addition to supporting Porter's theoretical advocacy of this relation, is also consistent with the view that economic performance and environmental performance are both related to the quality of management. Good managers, acting in the firm's long-term interest, accept the firm's social responsibility and adopt pro-active strategies for controlling environmental pollution. Finally, because we use market-based proxies to represent economic performance, the observed positive economic-performance–environmental-performance relation is also consistent with investors' preferences for equities of environmentally responsible firms. Socially responsible investing is becoming more popular, with over $1.5 trillion worldwide currently invested according to social or ethical criteria (Vogel, 2002).27 Third, we find that good environmental performers disclose (within the context of our definition of environmental disclosure) more pollution-related environmental information than do poor performers. This finding is consistent with discretionary disclosure theory's “good news” explanation. This result is also consistent with firms using voluntary disclosure to project a proactive environmental image by providing candid information regarding their environmental performance, even though that information may be viewed as “negative” on a situational basis. This disclosure policy appears to be at odds with strategies that minimize environmental disclosures because market participants may perceive such information as “bad news.” These results suggest that firms with records of good environmental performance can be more forthright in disclosing that performance. The study also documents a positive relation between past environmental disclosure and current environmental performance. This association is consistent with the notion that prior disclosure establishes a lower bound for management's environmental performance. Not achieving this lower bound might adversely challenge the expectations of market participants, and potentially trigger shareholder litigation. Fourth, this research introduces new empirical proxies for environmental performance and environmental disclosure. In contrast to studies that rely on qualitative rankings to measure environmental performance, this study adopts a quantitative measure: the ratio of toxic waste recycled to total toxic waste generated. Whereas this measure may have certain limitations as discussed below, this ratio also is sufficiently general to be a useful environmental performance measure across industries—a property that is essential in an inter-industry, cross-sectional research design, such as ours. This recycling ratio measure might be viewed as a summary statistic, much like the earnings number. We also construct a new measurement of environmental disclosure reported to investors that is uniquely preconditioned on the firm's polluting activities as reported to regulators. This disclosure metric not only controls for the degree of disclosure made by firms with limited polluting activities, but also extracts a “transparency” dimension for polluters that file mandated environmental information with regulators, yet do not disclose this information in financial reports. Finally, this study spans the research agendas of multiple academic disciplines and contributes to a growing body of interdisciplinary environmental knowledge. In motivating our research design, we call upon Ullmann's (1985) meta-analysis of empirical studies that investigate the interrelations among social performance, social disclosure, and economic performance, which was published in the Academy of Management Review. Our results are also consistent with management guru Michael Porter's win-win argument regarding the positive relation between environmental and economic performance, which is widely cited in both management and economic literature. The market-based proxies used to represent the firm's economic performance are common to both accounting and finance research. While environmental research questions may extend into the domains of several academic disciplines, researchers are reluctant to violate these academic boundaries. However, without such interdisciplinary trespassing, a holistic approach to investigating these interdisciplinary interrelations of interest would not be possible. Like all cross-sectional studies, limitations to interpreting our results apply regarding whether the time period examined is representative and the observed relations among the variables of interest are relatively stable over time. We know of no external event limiting 1994 as a sample period, and believe two of our three dependent variables—environmental performance and environmental disclosure—do not change dramatically around this temporal datum. The stability of economic performance is more problematic. We address this limitation by using two specifications for this variable: a changes specification (industry-adjusted returns) and a levels specification (share price). The cross-sectional design presents another limitation in our choice of a suitable proxy for environmental performance. Because pollution is determined by the production process, pollution-related measures of environmental performance tend to be industry-specific. For example, measures of air pollution (e.g., sulfur dioxide emissions) may be a relevant performance measure for the electric utility industry (Hughes, 2000), whereas measures of water pollution may be more relevant in measuring the environmental performance of firms in the pulp-and-paper industry (Cormier & Magnan, 1997). Because our measure of environmental performance (the ratio of toxic waste recycled to total toxic waste generated) is one of the few metrics suitable for inter-industry comparisons (National Academy of Engineering, 1999), it is probably less representative of environmental performance for some firms than industry-specific measures. Additionally, our measure for environmental performance does not consider the relative toxicity of the waste being recycled, and aggregates all waste into one medium (i.e., air pollution is combined with water pollution). Although this summary statistic (recycling ratio) is suitable for inter-industry comparisons, it likely to be noisy relative to industry-specific metrics. As explained above, one of the primary challenges in conducting this research was measuring each of the three dependent variables. Whereas we used two measures of economic performance and a recycling ratio common across industries for our measure of environmental performance, our choice of a measure for environmental disclosure was, by its very nature, subjective. Although we restrict our definition of environmental disclosure to include only specific pollution-related environmental measures, and clearly highlight this restriction throughout the discussion related to variable selection, our method of scoring disclosure quality retains a subjective element.28 As a final limitation, we recognize that our sample, drawn from S&P 500 firms, induces a size bias. Whereas our results may be generalized for large firms, inferring that small firms may behave similarly is overreaching. Although we acknowledge these limitations, we also believe that we have used those econometric tests most relevant in assuring that our models of simultaneous equations are correctly specified. Assuming correct specification, the simultaneous-equation research design provides a significant improvement in estimating the relations among environmental performance, environmental disclosure, and economic performance over that obtained by independently estimated OLS models. We conclude that the simultaneous-equation approach used in this study provides a more coherent explanation regarding the relations among environmental disclosure, environmental performance, and economic performance than do those reported by prior studies using pair-wise tests of association. Further research might incorporate different variables for these constructs over different sample periods. As the world becomes more environmentally conscious (e.g., the Kyoto Protocol on climate change), additional examination of the relations among economic performance, environmental performance, and environmental disclosure is increasingly warranted. The study's primary results that good environmental performance is associated with good economic performance and also with more forthcoming and factual environmental disclosure should be good news for those questioning the compatibility of corporate social responsibility and economic profitability. Non-financial measures of environmental performance, such as the recycling ratio presented in this study, may also be leading indicators of future financial performance. These measures therefore may be suitable candidates for incorporation in the firm's “balanced scorecard” used to evaluate managerial and firm performance. Managers evaluated in this manner should be increasingly proactive in introducing new processes that improve both production efficiency and environmental sustainability.