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This paper aims to analyze the effect of environmental performance (EP) on environmental disclosure (ED) and determine whether environmental costs (ECs) moderate this relationship. This paper extends legitimacy theory that focuses on the commonly assumed interaction between companies and community, with the effect of quantitative information that can summarize a large amount of narrative disclosure and its effect on narrative ED.

This paper uses regression analysis on 492 unbalanced panel data of emerging Asian countries' publicly listed companies between 2006 and 2019.

Results show that EP has a positive effect on ED. EC weakens the effect of EP and ED.

Extending the incentives to signal EP through disclosure, this cross-country study tests how quantitative EC information can summarize the narrative and reduce the level of disclosure. This paper also proves the summarization effect of environmental cost diminution in countries with low market sophistication.