Time to clean up environmental liabilities reporting: disclosures, media exposure and market implications

Abstract

We investigate firms' disclosures related to environmental liabilities (EL), how these vary with media exposure, and whether they have information content. Using a sample of European-listed firms reporting under IFRS from 2005 to 2016, we observe diversity in disclosure practices across industries and regions. Although there is an increasing disclosure trend, the level of disclosure of key inputs used to estimate EL (i.e. discount rates and horizons) remains low, with only 35% of firm-years with material EL containing disclosures of both inputs. Furthermore, we test and find that firms facing more media exposure related to environmental matters provide disclosures that are more specific and are more likely to disclose discount rates. Finally, we show that EL disclosure specificity is associated with lower bid-ask spreads following the filing of the annual report and reduced analyst forecast error and dispersion, suggesting specific disclosure reduces information asymmetry.

Evidenciação de Passivos Ambientais em Empresas de Energia Hidrelétrica.

“…Outrossim, pode-se concluir que há necessidade das empresas melhorarem as evidenciações acerca das informações ambientais reforçando o que se apresenta em outros estudos (Por exemplo, Barbosa et al, 2014;Barcelos et al, 2016;Coelho et al, 2010;Negash & Lemma, 2020;Paananen et al, 2021;Rover et al, 2008;Senn & Giordano-Spring, 2020). Vale salientar que o arcabouço teórico e legal existente para a realidade brasileira está aderente às normas internacionais.…”

“…Mais recentemente, no início do Século XXI, estudos internacionais mostram que a evidenciação de informações ambientais ainda carece de melhorias (Por exemplo, Negash & Lemma 2020;Paananen, Runesson & Samani, 2021;Senn & Giordano-Spring, 2020). Apesar de um aumento de práticas ambientais, estudos sinalizam que ainda são baixos os níveis de evidenciação relacionados a divulgação nos relatórios a respeito de passivos ambientais.…”

“…Outro estudo com empresas europeias, a partir de uma abordagem de normas internacionais de contabilidade, conduzido por Paananen et al (2021), traz a diversidade nas práticas de divulgação em todos os setores e regiões. De acordo com os autores, Aglaeudis Ferreira Rodrigues Campos; Christiano Coelho; Ana Lúcia de Araújo Lima Coelho; Maria Sueli Arnoud Fernandes. Prosppectus -Perspectivas Qualitativas em Contabilidade e Organizações.…”

Do auditors price litigious tone?

“…In a similar vein, Paananen et al . (2021) suggest that litigious tone reveals ambiguity, reflecting threats to a firm’s legitimacy and reputation (Barakat et al ., 2019). This stream of research suggests that managers might obfuscate information by using litigious tone strategically to mask poor performance, internal control deficiencies and the uncertainty of legal dispute outcomes, defence costs and related contingent liabilities.…”

“…We predict a positive association between litigious tone and audit fees. First, prior studies suggest that litigious tone captures a firm’s uncertainty and ambiguity (Weiss and Shon, 2017; Barakat et al ., 2019; Paananen et al ., 2021). Thus, we expect that auditors would be likely to perceive clients as riskier if they use more litigious language in their filings.…”