This study aims to examine the disclosure determinants of environmental performance indicators (EPIs) for a sample of US firms to understand if these disclosures are reliable or whether they are biased towards the reporting of positive information.
The study uses a panel data analysis to examine the association between firms’ EPIs disclosures and their environmental performances, and other economic and legitimacy factors.
The results show that firms’ disclosures are not associated with the level of environmental performance and that firms continue to provide EPI information even if they witness a decline in their environmental performance. The evidence suggests that firms’ environmental disclosures are reliable and indicative of their environmental performance.
The findings suggest that mandating EPI disclosures may increase the level of the information reported and reduce firms’ discretion over the disclosure of such information.
Reporting of EPIs is directly linked to firms’ environmental performances. By examining the association between EPI disclosures and environmental performance, the study contributes to the ongoing debate about firms’ reporting and whether it is informative to its stakeholders or whether firms use this type of information to legitimize their operations and portray it in a positive light.
