Voluntary social and environmental disclosure in New Zealand corporate annual reports

Abstract

This study empirically examines the levels of social and environmental disclosures made in annual reports of New Zealand companies over the three-year period of the study, and tests for any association between a number of corporate attributes and the level of social and environmental disclosures. Similar to Belkaoui and Karpik (1989), a social and environmental disclosure index consisting of 71 items was developed to measure the level of social and environmental information disclosures annual reports. This index was then applied to 135 corporate annual reports for the 2000, 2001 and 2002 financial years of the NZX top 50 listed companies. The association between the extent of disclosure and various corporate characteristics was examined using a linear regression model. Profitability, ownership concentration, reporting in 2002 annual reports, and companies within the primary sector were positively associated with the levels of disclosure. Company size, leverage, and reporting in 2001 annual reports were not found to be associated with the levels of social and environmental disclosure. A significant increase in the levels of social and environmental disclosures was found over the period of the study, 2000 to 2002. However, the incremental changes between 2000 and 2001, and between 2001 and 2002 were not individually significant. It is concluded from these results that even though there is a general increase in the levels of social and environmental disclosures, this increase is on a gradual basis and was only statistically significant over a two-year period. The results contribute to the social and environmental reporting literature in a New Zealand context. An index was developed, in a New Zealand context that may contribute to further research that measures the level of social and environmental disclosures and reporting. Additionally, this is the first significant study examining social and environmental disclosures within New Zealand since the area has become popularised, through the introduction of initiatives such as triple bottom line reporting.