Does Web Disclosure of Environmental Information Affect Litigation Awards?

Abstract

Companies frequently use Internet Financial Reporting (IFR) to distribute financial and nonfinancial information to stakeholders. Research suggests that companies often distribute information via the web for impression management purposes in order to diffuse potential negative reactions and/or to promote positive reactions to corporate policies and actions. The purpose of this study is to investigate whether web disclosure of environmental information and the presentation format influences the outcomes of litigation awards. Results indicate that even a partial web disclosure of pending environmental sanctions on a company’s financial statement reduces the compensatory and punitive damages that jurors award when shareholders suffer losses as a result of environmental sanctions. The results also indicate that firms using enhanced presentation formats when disclosing environmental information further reduce the amount of damages awarded against them. These results have implications for users and preparers of IFR, and for policy makers weighing mandates for disclosure of nonfinancial information in annual reports.

Citation

Chen, J., Arnold, V. and Sutton, S.G. (2014), "Does Web Disclosure of Environmental Information Affect Litigation Awards?", Advances in Accounting Behavioral Research (Advances in Accounting Behavioural Research, Vol. 16), Emerald Group Publishing Limited, Leeds, pp. 1-22. https://doi.org/10.1108/S1475-1488(2013)0000016006