Factors associated with the level of superfund liability disclosure in 10K reports: 1991-1997

Academy of Accounting and Financial Studies Journal, Sept, 2008 by Carol A. Cox

Policy implications for the SEC include improving efforts to promote adequate environmental disclosures. For the FASB and AICPA, the findings indicate that current authoritative guidance is not effective in promoting consistent and adequate environmental disclosure. Therefore, standard-setters must endeavor to provide comprehensive and specific guidance regarding environmental liabilities that can be consistently applied by firms and readily monitored by the SEC through use of EPA data.

The findings also have implications for creditors and investors, who expect transparency in the disclosures of public companies. The transparency of disclosure in 10K reports is now particularly important in light of the increased attention on financial reporting due to the current wave of corporate secrecy and corruption. The findings of the current study may alert creditors and investors to the inconsistencies in the environmental disclosures of publicly traded firms, further contributing to public distrust of financial reports and the accounting profession.

The current study examines factors related to environmental liability disclosure decisions by estimating the association between ED and proxies for size, industry, profitability, growth and regulatory influence. The findings indicate that size, industry, profitability, and regulatory influence are significantly associated with environmental disclosure decisions. Understanding which firm characteristics are associated with the level of disclosure can assist regulators in better monitoring the disclosure practices of firms. In addition, such understanding can assist investors when evaluating the adequacy of environmental disclosure in financial statements. Researchers interested in building a theory of social disclosure can also benefit from the current findings.

The study contributes to the corporate social reporting literature by providing more recent information, specifically in the context of environmental disclosure. Early literature that examines the determinants of social disclosure choice did not focus exclusively on environmental disclosure. Whereas early studies found no association between profitability and the extent of social disclosure, the current study finds a statistically significant negative association between profitability and environmental disclosure. The study examines a longer period and finds profitability, growth, size, industry classification and environmental liability estimates to be associated with the level of environmental disclosure.

ACKNOWLEDGMENT

Thanks always to my parents Annie and Andrew Cox, for their unending support. I want to also thank each member of my Dissertation Committee at Virginia Commonwealth University: Dr. Ruth W. Epps (Chair), Dr. Benjamin B. Bae, Dr. Kenneth N. Daniels, Dr. Tanya S. Nowlin, and Dr. Benson Wier, for their guidance and direction. In addition, I would like to express my deepest gratitude to the faculty at George Mason University, who provided much needed assistance. Finally, thanks to the faculty in the AAA Mid-Atlantic Region, for providing excellent feedback.