Textual characteristics of corporate sustainability disclosure and corporate sustainability performance: evidence from Australia
ISSN: 2049-372X
Article publication date: 14 February 2022
Issue publication date: 8 May 2023
Abstract
Purpose
This study aims to analyze whether various textual characteristics in corporate sustainability disclosure associate with corporate sustainability performance in Australia, pertaining to tones of language and readability. The voluntary disclosure theory and legitimacy theory are used to formulate the study hypothesis.
Design/methodology/approach
Using data from Australian listed firms (2002–2016), four textual characteristics are examined: tone of optimism, tone of certainty, tone of clarity and readability. Corporate sustainability performance is measured by Thomson Reuters Asset4 ratings. Different strategies are adopted to mitigate endogeneity concerns.
Findings
The authors found that there is a positive relationship between the textual characteristics of sustainability disclosure and sustainability performance. Specifically, firms with better performance communicate in an optimistic, certain, clear and more readable manner.
Practical implications
The results suggest that Australia’s voluntary reporting status does not induce a combination of poor performance and positive disclosure. This paper should be of interest to investors and other stakeholders and also informs regulatory policy on sustainability disclosure in Australia.
Originality/value
The authors contribute to the sustainability disclosure literature using computer-based textual analysis to explore whether firms reveal their sustainability performance by “how things are said” (i.e. textual characteristics) in sustainability disclosure. As far as the authors could ascertain, they are the first to investigate textual characteristics of sustainability disclosure in Australia.
Keywords
Acknowledgements
The authors of this paper appreciate comments from Charl De Villiers, Elisabeth Sinnewe, Jacquelyn Humphrey and Kathleen Herbohn and participants of the 2019 APIRA Conference, the 2018 FIRN PhD Symposium and the 17th A-CSEAR Conference. The authors of this paper appreciate fund support from University of Tasmania. This paper is based on the first author’s PhD thesis.
Citation
Li, Z., Jia, J. and Chapple, L.J. (2023), "Textual characteristics of corporate sustainability disclosure and corporate sustainability performance: evidence from Australia", Meditari Accountancy Research, Vol. 31 No. 3, pp. 786-816. https://doi.org/10.1108/MEDAR-03-2021-1250
Publisher
:Emerald Publishing Limited
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