Keun-Hyo Yook, Hakjoon Song, Dennis M. Patten and Il-Woon Kim
This paper aims to examine whether the amount of costs disclosed as relating to environmental controls is associated with environmental performance in terms of carbon-based…
Abstract
Purpose
This paper aims to examine whether the amount of costs disclosed as relating to environmental controls is associated with environmental performance in terms of carbon-based eco-efficiency, and whether any relation supports voluntary disclosure theory or legitimacy theory arguments. Further, this paper attempts to determine whether the relations differ across the initial Kyoto Protocol period.
Design/methodology/approach
In this study, the focus was on Japanese firms over the period from 2002 to 2012. Disclosed environmental control costs (capital expenditures and operating costs) were identified and eco-efficiency measures based on carbon emissions were calculated. Relations were tested for using regression models controlling for other potential impact factors.
Findings
This study’s results indicate a negative relation between disclosed levels of environmental control costs and eco-efficiency performance measures, and, for two of our three eco-efficiency metrics, this is more pronounced over the Kyoto Protocol period.
Research limitations/implications
These results support a legitimacy theory (as opposed to voluntary disclosure theory) explanation for the relation between the levels of disclosed environmental control costs and carbon-based eco-efficiency.
Originality/value
This study is the first to explore how flexibility in cost classification may be used by companies to foster a disclosure strategy.