Introduction
Recently, the environmental and social related impact of firms is under the increasing attention of the stakeholders. The rising awareness of environmental and social impact results in the implementation of Corporate Social Responsibilities (CSR) activities within a firm. When a firm implements CSR strategy into the organisation, a switch is made in the focus of the firm. Not only the financial reports face attention, but also the disclosure of environmental and social performances are important.
Positive Accounting Theory
Since the late eighties a lot of research has been done on the topic of CSR. One of the most popular research is Positive Accounting Theory (PAT) from Watts & Zimmerman (1986). The PAT is based on the concept …show more content…
Large firms prefer to mitigate the likelihood that government or regulator will impose more stringent regulations or higher taxes by disclosing CSR (Milne 2002). This is due to that larger firms are more susceptible to scrutiny from a more diverse range of stakeholders since they are highly visible to external groups. As such, larger firm tends to disclose voluntary environmental and social …show more content…
According to the authors, firms with a high leverage must adhere to strict debt covenants. This impairs their ability to spend resources on environmental and social related activities and disclose information about CSR. A similar finding was also reported by Cormier et al (2003) in French firms. It is very unlikely that managers whom have employed accounting procedures that shifted profits from future to current periods will invest in environmental and social activities as such activities would lead to an outflow of resources (additional costs and foregone profits) and worsen the firm’s leverage. Environmental and social reporting can be viewed as an outcome of the manager’s assessment of the economic costs and benefits to be derived from additional disclosure. Hence, the better the economic performance of a firm, the greater its social responsibility activity and
Recently, the environmental and social related impact of firms is under the increasing attention of the stakeholders. The rising awareness of environmental and social impact results in the implementation of Corporate Social Responsibilities (CSR) activities within a firm. When a firm implements CSR strategy into the organisation, a switch is made in the focus of the firm. Not only the financial reports face attention, but also the disclosure of environmental and social performances are important.
Positive Accounting Theory
Since the late eighties a lot of research has been done on the topic of CSR. One of the most popular research is Positive Accounting Theory (PAT) from Watts & Zimmerman (1986). The PAT is based on the concept …show more content…
Large firms prefer to mitigate the likelihood that government or regulator will impose more stringent regulations or higher taxes by disclosing CSR (Milne 2002). This is due to that larger firms are more susceptible to scrutiny from a more diverse range of stakeholders since they are highly visible to external groups. As such, larger firm tends to disclose voluntary environmental and social …show more content…
According to the authors, firms with a high leverage must adhere to strict debt covenants. This impairs their ability to spend resources on environmental and social related activities and disclose information about CSR. A similar finding was also reported by Cormier et al (2003) in French firms. It is very unlikely that managers whom have employed accounting procedures that shifted profits from future to current periods will invest in environmental and social activities as such activities would lead to an outflow of resources (additional costs and foregone profits) and worsen the firm’s leverage. Environmental and social reporting can be viewed as an outcome of the manager’s assessment of the economic costs and benefits to be derived from additional disclosure. Hence, the better the economic performance of a firm, the greater its social responsibility activity and