Do financial markets care about social and environmental disclosure? Further evidence and exploration from the UK

Do financial markets care about social and environmental disclosure? Further evidence and... Purpose – The purpose of the paper is to explore whether there is any relationship(s) between social and environmental disclosure and the financial market performance of the UK's largest companies. Design/methodology/approach – Two data sets were used in the study. The CSEAR database of UK companies provided the social and environmental disclosure component. The second data were the stock market returns earned by the largest UK companies as listed by The Times 1,000. A series of statistical tests was performed to examine whether any relationship could be detected in either the cross sectional or longitudinal data over a period of ten years. Findings – No direct relationship between share returns and disclosure was found. Neither had such a relationship been expected, in keeping with the prior literature. However, the longitudinal data revealed a convincing relationship between consistently high(low) returns and the predilection to high(low) disclosure. There is no single convincing theoretical explanation as to why this might be. Originality/value – This paper demonstrates the importance of examining a range of hypotheses on longitudinal data when other research suggests that any relationships are unlikely to be unstable year on year. More significantly, this paper is motivated not by a concern to understand better how investors' already‐high returns may be bettered, but rather to explore how the alleged potential of financial markets to contribute to social responsibility and sustainability might be engaged. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Accounting, Auditing & Accountability Journal Emerald Publishing

Do financial markets care about social and environmental disclosure? Further evidence and exploration from the UK

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Publisher
Emerald Publishing
Copyright
Copyright © 2006 Emerald Group Publishing Limited. All rights reserved.
ISSN
0951-3574
DOI
10.1108/09513570610656105
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of the paper is to explore whether there is any relationship(s) between social and environmental disclosure and the financial market performance of the UK's largest companies. Design/methodology/approach – Two data sets were used in the study. The CSEAR database of UK companies provided the social and environmental disclosure component. The second data were the stock market returns earned by the largest UK companies as listed by The Times 1,000. A series of statistical tests was performed to examine whether any relationship could be detected in either the cross sectional or longitudinal data over a period of ten years. Findings – No direct relationship between share returns and disclosure was found. Neither had such a relationship been expected, in keeping with the prior literature. However, the longitudinal data revealed a convincing relationship between consistently high(low) returns and the predilection to high(low) disclosure. There is no single convincing theoretical explanation as to why this might be. Originality/value – This paper demonstrates the importance of examining a range of hypotheses on longitudinal data when other research suggests that any relationships are unlikely to be unstable year on year. More significantly, this paper is motivated not by a concern to understand better how investors' already‐high returns may be bettered, but rather to explore how the alleged potential of financial markets to contribute to social responsibility and sustainability might be engaged.

Journal

Accounting, Auditing & Accountability JournalEmerald Publishing

Published: Mar 1, 2006

Keywords: Financial markets; Shares; Returns; Social accounting; United Kingdom

References

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    Cordeiro, J.J.; Sarkis, J.
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    Epstein, M.J.; Freedman, M.
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    Gray, R.H.
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    Gray, R.H.; Bebbington, K.J.
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    Gray, R.H.; Javad, M.; Power, D.M.; Sinclair, C.D.
  • Corporate social and environmental reporting: a review of the literature and a longitudinal study of UK disclosure
    Gray, R.H.; Kouhy, R.; Lavers, S.
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    Gray, R.H.; Owen, D.L.; Maunders, K.T.
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    Jaggi, B.; Freedman, M.
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    Lehman, G.
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    Patten, D.M.
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    Tinker, T.; Gray, R.

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