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The Quality of Disclosures concerning Environmental Liabilities and the Role of Media Visibility

Conference paper
Authors Mari Paananen
Emmeli Runesson
Niuosha Samani
Published in Nordic Accounting Conference, 2018, Copenhagen
Publication year 2018
Published at Department of Business Administration, Accounting
Language en
Keywords Environmental liabilities, discount rate, disclosure quality, computerized textual analysis
Subject categories Business Administration

Abstract

We investigate the effect of firm visibility on firms’ disclosure quality. Specifically, we examine the effects of media attention on firms’ disclosures about environmental liabilities by European firms reporting under IFRS during the period 2005 to 2014. Using multivariate analysis, we find that firms that are more visible are more forthcoming with information about discount rates and horizons, use more specific language and adopt a more cautious tone (measured using sentiment analysis). Overall, we find that only 44% (45%) of our sample firms disclose discount rates (horizons) used to estimate the provision. In additional analyses, we examine the content and tone of media articles and find that in cases where the media focuses on environmental issues and uses litigious language, firms disclose more, use more negative language and provide more specific information. Finally, we examine whether there are differences between Eastern and Western Europe when it comes to the disclosure quality and we find that disclosures by Eastern European firms are less affected by visibility in the media.

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