Voluntary disclosure theory and financial control variables: An assessment of recent environmental disclosure research

A growing number of environmental disclosure studies are using financial control variables based on arguments from the voluntary disclosure theory (VDT). The VDT justifications for these controls are based on assumptions that disclosure is used as a tool for reducing information asymmetry between managers and investors. Given the findings reported in a broad sample of legitimacy-based environmental disclosure studies, we question whether the disclosures are primarily aimed at the market, and as such attempt to assess evidence to date on the relation between VDT financial control variables and differences in environmental disclosure. Based on a review of thirteen recent environmental disclosure studies including VDT financial control variables in their analyses, we fail to find, with the exception of firm size, evidence suggesting any systemic associations. Further, we assess whether including VDT financial control variables changes the inferences on the relation between environmental performance and environmental disclosure in one recent legitimacy-based study (Cho & Patten, 2007) and find that even with the controls, a negative association between performance and disclosure still exists. Overall, we question the need for VDT financial control variables in environmental disclosure research, but encourage further exploration of the relations using more consistent measures and media of disclosure.