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Trevor D. Wilmshurst: Victoria University of Technology, Melbourne, Australia
Geoffrey R. Frost: University of Newcastle, Newcastle, Australia
ACKNOWLEDGMENT: An earlier version of this paper was presented at The Eighth Annual Conference of Accounting Academics - Hong Kong 1996, and to an Internal Seminar of the Accounting and Finance Department at Victoria University of Technology. Special thanks to Craig Deegan, Patricia Stanton, John Staunton and the two anonymous referees for their insightful and helpful comments. Financial assistance for data collection was provided by the Australian Society of CPAs.
Introduction
In recent years there has been increased community attention toward the identification of approaches to deal more effectively with environmental concerns. This discussion has resulted in calls for industry to become more responsive and to manage its impact on the environment better (Schmidheiny, 1992). Many corporate managements have developed environmental management systems and increasingly adopted environmental reporting within the annual report (Deegan and Gordon, 1996; Gray et al., 1995; Guthrie and Parker, 1990). Environmental reporting has remained predominantly a voluntary practice, with many of the current Australian accounting "rules" predisposed to the concealment of environmental information (see Frost and Wilmshurst, 1996b)[1].
Prior research on environmental reporting has selectively examined external factors and subsequent disclosures (Deegan and Gordon, 1996; Deegan and Rankin, 1996; Patten, 1992) failing to account for an interceding variable, that of management's perceived importance of these factors. Evidence suggests that environmental information within the annual report is subject to senior management intervention (O'Donovan, 1996). However, research on the factors that influence or motivate management subsequently to disclose environmental information has been limited (see, for example, Tilt, 1994).
This paper is motivated by this lack of research, and considers whether legitimacy theory provides an explanation of management's motivation to disclose environmental information within the annual report. Two specific issues are analysed in this paper. First, the paper examines the importance placed by management on factors that focus attention on the decision to disclose environmental information. Second, the paper analyses whether the attitudes of management are consistent with actual reporting practices. This provides some support for the rationale that environmental reporting is a tool utilised by management to legitimise their activities where management attitudes are also consistent with that position. This study therefore extends prior research by...