“The impact of environmental disclosure on value relevance: Moderating role of environmental performance”

Existing research lacks to adequately examine how environmental performance moderates the influence of environmental disclosure on value relevance. This study pursues to investigate the direct influence of environmental disclosures on value relevance, measured by the fair value of common equity. Moreover, it tests how environmental performance moderates the influence of environmental disclosures on value relevance. Data were gathered from the annual reports of Jordanian industrial firms listed on the Amman Stock Exchange from 2018 to 2021. The study employed the Ohlson model to assess the value relevance. Furthermore, both earnings and the book value of equity were included as other independent variables, as required by the model. This study found that environmental disclosures positively impact the value relevance of industrial firms listed on the Amman Stock Exchange. Moreover, such disclosures positively influence the value relevance of industrial firms with greater environmental performance. Earnings and the book value of equity also positively influence the value relevance. The results were similar to those obtained by conducting panel regression after controlling for both the industry and year effects. It is therefore recommended that directors exploit environmental disclosures to increase the value relevance of the firm. At the same time, they should consider environmental disclosures as an essential component to integrate into future strategies. Hence, firm managers should consistently evaluate the environmental and financial performance, followed by developing well-designed strategies to increase the environmental performance and reliability of environmental disclosure due to their positive role in enhancing value relevance.


INTRODUCTION
The global interest in voluntary disclosure, such as environmental, social, and governance disclosure, has recently become evident (Chouaibi & Affes, 2021).Voluntary disclosures can be obtained from integrated reporting or corporate social responsibility (CSR) reports, including social, environmental, and forward-looking information, alongside those recommended by standards or regulations (Ananzeh et al., 2022).
Despite this global interest, the influence of voluntary disclosure on either financial performance or the firm's value remains under debate; for example, an analysis conducted on conventional and Islamic banks in an emerging economy reported that voluntary disclosures do not significantly influence bank performance (Nobanee & Ellili, 2022).Moreover, Hsiao et al. (2022) found no correlation between voluntary integrated reporting and the cost of equity and firm value.Yet, a study conducted in Bangladesh found that integrated reporting disclosure under a voluntary regime positively impacts the return on assets and return on equity (Islam, 2021).This has led to a debate regarding the value of enhanced voluntary disclosures related to integrated reporting (Hsiao et al., 2022).
The effects of environmental disclosures on the value relevance and the moderating role of environmental performance are yet to be conclusively determined.Thus, the current study is relevant due to the potentially vital role of environmental disclosures and environmental performance in reflecting firms' responsibility toward environmental matters, which might increase firms' CSR and enhance the sustainability deemed essential to global concerns.Such focus is pertinent due to the negative impact of pollution, emissions, and waste on the environment and living organisms, particularly given the emerging climate change phenomenon.Moreover, the Jordanian government has adopted environmental rules to compel industrial firms to decrease their emissions.Therefore, enhancing the environmental disclosures and environmental performance will assist the government and responsible bodies in exercising their supervisory responsibilities toward the environment, alongside the potentially positive influence on performance that can ultimately support the economy in general and the firm value in particular.

LITERATURE REVIEW AND HYPOTHESES DEVELOPMENT
Disclosure has two facets.Mandatory disclosure investigates how companies comply with either proper financial reporting standards or prescribed regulations (Appiah et al., 2016).Voluntary disclosure examines the quality of transparency regarding the overall effectiveness (Nandi & Ghosh, 2013).In contrast to mandatory disclosure research, there is increasing demand for the study of voluntary disclosure.The broad dissatisfaction with mandatory disclosure in preventing poor corporate conduct has been cited as the impetus for this emphasis on additional voluntary disclosure (Binh, 2012).It is believed that enhanced voluntary disclosure in annual reports provides several advantages for businesses, managers, owners, and other stakeholders; for example, an effective disclosure policy can reduce the information asymmetry between the principles and agents, which lowers the agency cost (Jensen & Meckling, 1976).
One of the main determinants utilized for promoting the quality of accounting information is environmental disclosure.The enhanced disclosure of environmental action highlights the effectiveness of corporate governance and potentially eliminates the obstacles that impede companies from accessing capital markets (Ahmadi & Bouri, 2017).
As environmental disclosure provides stakeholders with relevant information, shareholders require environmental information to be mandatorily disclosed, audited, and published within the content of the annual report, as well as on the firm's website (De Villiers & Van Staden, 2012).
On the other hand, Radhouane et al. ( 2018) asserted that although the environmental obligations are satisfactory by customers and shareholders of companies with superior environmental performance, shareholders perceive and interpret these disclosures differently from customers.Therefore, Rahim (2021) emphasized the need to take appropriate action to improve and enhance the company's environmental disclosure due to its positive role in identifying the efficiency of corporations.
Other benefits of environmental disclosure have been noted, with a study conducted in Jordan by Gerged et al. (2021a) emphasizing the negative associations between corporate environmental disclosure and earnings management, as both social disclosure and environmental disclosure play a major role in enhancing transparency by minimizing the information asymmetry of the stock market (Cormier et al., 2011).
In terms of value relevance, Ohlson (1995) develops and analyzes a model of a firm's market value as it relates to contemporaneous and future earnings, book values, and dividends.Two owners' equity accounting constructs provide the underpin-nings of the model: the clean surplus relation applies, and dividends reduce current book value but do not affect current earnings.The model satisfies many appealing properties and provides a useful benchmark when one conceptualizes how market value relates to accounting data and other information (p.661).
Moreover, Bernard (1995) recognized that the contributions of Feltham andOhlson's (1995, 1996) and Ohlson's (1995) studies might influence the trend of empirical accounting studies by guiding scholars in the accounting field toward forming connections between accounting numbers and company value.This contradicts previous models that emphasized the relationship between firm value and anticipated future accounting numbers.Feltham andOhlson (1995, 1996) and Ohlson (1995) declared that the relationship between firm value and previous or current accounting numbers was based on the assumption that accounting data progress based on a linear model (Stober, 1999).To express it differently, Fellham and Ohlson's (1995) and Ohlson's (1995) valuation models characterize the value of firms by relying upon (discounted) accounting data instead of future cash flows.
The critical functions that accrual earnings, book value, and dividends play in equity valuation were identified by Feltham andOhlson (1995, 1996) and Ohlson (1995Ohlson ( , 2001)); for example, Ohlson's valuation model "states that the firm value is a linear function of book values of owners' equity and earnings" (Tshipa et al., 2018, p. 377).
This model enables researchers to examine the influence of other variables (e.g., the disclosure level) on the value relevance of a firm with the existence of both earnings and the book value of equity (BVE) as independent variables.This was adopted by many researchers who tested the influence of the disclosure level or adoption (e.With this achievement, excellent environmental performance results from adopting a well-defined practical environmental strategy deemed an incentive for companies to increase the environmental disclosure to their investors and other stakeholders (Ahmadi & Bouri, 2017).
The socio-political theories, namely, political economy, legitimacy, and stakeholder theory (Patten, 2002a), assume a negative relationship between the level of environmental disclosure and environmental performance.The key claim under socio-political theories considers the disclosed information as a sign of either social or political pressure that might be encountered in the business; for example, legitimacy theory deems social disclosure to respond to the force exercised by shareholders and other stakeholders (Magness, 2006).The findings of several studies support the premise of the socio-political theories (Patten, 2002b;Cormier et al., 2011).
Although the debate regarding voluntary disclosure and socio-political theories is more descriptive at the company level of environmental disclosure, the findings are mixed, with some studies asserting that there is no association, or merely a weak association, between environmental disclosure and environmental performance (Ingram & Frazier, 1980;Runtu & Naukoko, 2014;Wiseman, 1982).Ingram and Frazier (1980) were the first to study the association between environmental disclosure and environmental performance, whereby environmental performance was measured through the Council on Economic Priorities (CEP) index, and no relationship was found between the two variables.Wiseman (1982) performed a similar study, which confirmed the absence of a relationship between environmental performance based on the CEP index and environmental disclosure based on the Wiseman index.However, Patten (2002a) criticized these studies that failed to control for either the firm size or the effect of industry.
Concerning the role of environmental performance in directing the influence of environmental disclosure on companies' performance or value, Runtu and Naukoko (2014) asserted no positive correlation between environmental performance and financial performance, which implicitly indicates that environmental performance has no direct effect on economic performance.As aforementioned, previous studies point toward the possibility of a positive impact or relationship between environmental disclosure and environmental performance, in addition to a positive impact of environmental disclosure on the firm's performance or value.This consequently proposes the possible indirect impact of environmental performance on companies' performance or value, as the extent of environmental performance might first influence environmental disclosure.Then, the level of en-vironmental disclosure might influence company value.Expressed differently, the environmental performance might moderate the relationship with or the influence of environmental disclosure on firm value (Runtu & Naukoko, 2014).
Based on the above arguments and discussion, two hypotheses were developed, and a positive sign was presumed for both hypotheses as follows: H1: The level of environmental disclosure positively impacts the value relevance of industrial firms listed on the Amman Stock Exchange.
H2: The level of environmental disclosure positively impacts the value relevance of industrial firms listed on the Amman Stock Exchange with greater environmental performance.

METHODOLOGY
The study sample comprised 46 companies (with 184 firm-year observations), representing all of the Jordanian industrial listed companies that published their financial reports during the 2018-2021 period; hence, the entire population was targeted.
Selecting industrial firms was based on these firms being more attached to environmental behaviors than other sectors, which would enhance the reliability of the results.The data were collected from the financial reports of the industrial firms for the fiscal years of the study period.
The following criteria were utilized to determine the inclusion of the firm within the study: 1) listed on the Amman Stock Exchange before 2018; 2) the availability of information for the 2018-2021 period; 3) accessibility of the financial statements and additional notes.
After applying these criteria, Table 1 presents the number of industrial firms based on the industry, with most of the firms (n = 11) belonging to the mining and extraction sectors.Following Lee (2017), the utilized process to score environmental disclosure ranged from 0 to 3 as the following: 1) no disclosure (0); 2) generally disclosed without any specifications (1); 3) non-quantitative but specific disclosures (2); 4) quantitatively disclosed (3).
Environmental performance (moderating variable) is measured based on the ranking of the Council on Economic Priorities (CEP).In addition to these environmental performance indicators (EPI), the credibility within the modified Wiseman index is also considered to measure environmental performance (Acar & Temiz, 2020) alongside the level of compliance.In other words, it is measured based on an index of three partsindicators, credibility, and compliance -as illustrated in the disclosure index (Appendix C).
The variables are subject to content analysis, a method for collecting information that involves classifying qualitative or quantitative information into particular classes to originate forms in reported information.
Table 2 presents the study variables, as well as the measurement and definition of the variables within the research hypotheses.The Ohlson model also includes earnings and book value of equity as additional independent variables.

Dependent variable
Value relevance (VR) The relationship of these variables based on the Ohlson model (with the existence of both earnings and book value of equity) is shown in Figure 1.
The Ohlson model (Ohlson, 1995) enables researchers to examine the influence of other variables (e.g., the disclosure level) on the value relevance of a firm, with the existence of both earnings and BVE as additional independent variables.

The equation of the
where FVCE represents the fair value of common equity, BVE indicates the book value of equity, ED is the environmental disclosure, and EP represents the environmental performance, with both the firm size and leverage as control variables.Table 4 presents the Pearson correlation coefficient among the variables.There is a significant and positive association between the interactive variables environmental disclosure × environmental performance and value relevance (coefficient = 0.2829; p < 0.01), earnings and value relevance (coefficient = 0.6010; p < 0.01), and book value of equity and value relevance (coefficient = 0.6221; p < 0.01) which was the highest correlation coefficient to occur between variables.Leverage is the only variable that has no association with some variables.Concerning Kennedy (2003), the problem associated with collinearity will happen if the correlation coefficient exceeds 80%, thus signaling that multicollinearity occurs between the variables.As illustrated in Table 4, it can be established that the problem of collinearity does not exist.Testing the violation of several statistical assumptions is vital before conducting a regression test; these assumptions are the normality of distribution, stationarity, multicollinearity, autocorrelation, and heteroscedasticity.

RESULTS
Concerning the normality assumption, Field (2009) accentuated that the violation of normality is unlikely to occur with a sample size exceeding 30.Therefore, the central limit theorem pertaining to normality was adopted, which implies that the current study's data meet the normality assumption.
The statistical test offered by Levin et al. (2002) was executed to test the stationarity to prevent spurious regressions.The findings, not provided owing to space limits, presented significance levels for all the variables less than 0.05; this indicates that these variables are stationary and that the problem about spurious regression is not in place.
The variance inflation factor (VIF) was utilized to test for multicollinearity between the independent variables.The maximum value of VIF in the regression models of the current study, as shown in Tables 5 and 6, is 2.27, which underlines the absence of a multicollinearity problem since Hair et al. (1998) stated that if the VIF value is lower than 10, then the multicollinearity problem does not exist.
Wooldridge's (2010) test was conducted to examine the autocorrelation and heteroscedasticity, respectively, with the findings again not provided owing to space limitations.
Tables 5 and 6 show the regression analysis results for Model 1, which examines the influence of environmental disclosure on the value relevance within the Ohlson model, without considering the impact of both the year and industry effects, which are tested in Model 2. The findings assert that environmental disclosure positively influences the value relevance (β = 0.0479326; p < 0.01), which confirms the anticipation regarding the positive impact.This, in turn, supports the first hypothesis.Alternatively, a unit rise in the standard deviation of environmental disclosure will increase firms' value relevance by 0.99 percent (0.0479 • 0.206).
In terms of other independent variables within the Ohlson model, the results of Model 1 in Tables 5 and 6 show that both earnings and book value of equity positively and significantly influence the value relevance of companies at p < 0.01.This was predicted, as it is unlikely for these variables to have no effects on the value relevance within the Ohlson model.Similarly, the control variables (size and leverage) in Model 1 in Tables 5 and 6 significantly influence the value relevance at p < 0.01.In contrast, the influence of size is negative, which agrees with the prediction of the current study.The key kinds of panel data models consist of random-effects and fixed-effects models.The Hausman test is executed to choose between random-effects or fixed-effects models (Hausman, 1978).The results suggested that the fixed-effects regressions are preferable for Model 2, as illustrated in Tables 5 and 6.
The results of the panel data are shown in Model 2 in Tables 5 and 6.Nevertheless, both the industry and year effects are controlled in the regression models.This is vital, as either environmental dis-closure or environmental performance may vary across industries and throughout the years, affecting firms' value relevance.The equations to the regression model number 2 after controlling for both the industry and year effects are as follows.
Equation 4 tests hypothesis 1 regarding the impact of environmental disclosure on the value relevance, measured by the fair value of common equity based on the Ohlson model after controlling for both the industry and year effects (related to As illustrated in Tables 5 and 6, the regression results for the panel data presented in Model 2 are similar to those presented in Model 1 (without controlling for the industry and year effect).The findings in Table 5, Model 2, show that environmental disclosure positively and significantly impacts the value relevance (β = 0.0414211; p < 0.05), supporting the expectation of a positive impact.Accordingly, this also supports the first hypothesis.Thus, a unit growth in the standard deviation of environmental disclosure will increase companies' value relevance by 0.85 percent (0.0414 • 0.206).In contrast to the prior results (Table 5, Model 1), the influence of leverage on the value relevance is insignificant (β = 0.0213281; p = insignificant).In addition, the influence of the book value of equity is significant at p < 0.05 instead of p < 0.01.
The findings of Model 2 in Table 6 are similar to those presented in Model 2, Table 5.Furthermore, the results indicate that even after considering the controlling effects of the industry and year, environmental disclosure • environmental performance positively and significantly impact the value relevance in Model 2 (β = 0.0154754; p < 0.05).It might be claimed that increasing a unit in the standard deviation of environmental disclosure results in increasing the value relevance by 0.57 percent (0.0275192 • 0.206) in companies with lower environmental performance, whereas a unit rise in the standard deviation of environmental disclosure results in maximizing the value relevance by 0.89 percent (0.0275192 • 0.206 + 0.0154754 • 0.206) in firms with higher environmental performance.Hence, the findings also agree with the second hypothesis and the interactive positive and significant impact of environmental disclosure and environmental performance on the value relevance.

DISCUSSION
There is a debate in the literature regarding the possible influence of environmental disclosure on financial performance or firm value.Unlike prior investigations, based on the Ohlson model, the present study examined whether higher environmental performance enhances the positive effect of environmental disclosure on the value relevance.
The results showed that environmental disclosure has a positive significant influence on the value relevance of firms, which is in agreement with the results of

Yang et al. (2020)
. This may be due to environmental disclosure enhancing the firm's reputation and ethical situation, which, in turn, leads to a positive impression on the stakeholders that eventually enhances the firm's value (Alipour et al., 2019b).
This phenomenon encourages owners to emphasize the environmental information to be disclosed, audited, and published in a mandatory manner in both the annual report and on the firm's website (  Patten, 2002aPatten, , 2002b)).
The outcomes of this study imply various theoretical and practical implications.There is a contribution to the body of literature by delivering unique insights regarding the effect of environmental disclosure on the value relevance of firms, as well as investigating the influence of greater environmental performance on this association.Moreover, the current study is also distinct from other studies measuring the dependent variable.It gave more consideration to market-based proxies when examining the impact of environmental disclosure on the value relevance by referencing the fair value of common equity based on the Ohlson model.
There are a number of practical implications for directors, policymakers, and other stakeholders.In particular, climate change has received significant attention in recent years, thus exposing companies to increased stakeholder pressure.
The findings of the current study imply numerous practical implications.For instance, the findings revealed that environmental disclosure significantly and positively impacts the market-based proxies' measures, by enhancing transparency as well as non-financial disclosures.This implies that directors can exploit environmental disclosure to increase the value relevance of the firm.At the same time, they should consider environmental disclosure as an essential component to integrate into future strategies.The managers of these firms should ensure that they accomplish their environmental mission and increase the quality of environmental disclosure as a mechanism for improved value relevance.
Besides, the results disclosed that increased environmental performance enhances the impact of environmental disclosure on the value relevance of firms.Accordingly, policymakers should focus on increasing environmental performance alongside environmental disclosure, consequently improving common shares' fair value.The implemented procedures should thus be modified to support higher environmental performance to realize the achievable favorable outcomes.
Moreover, there is no particular regulation or guidance about environmental reporting and disclosure in Jordan since environmental information disclosure is voluntary.Hence, policymakers must commence developing rules and guidance to be mandatorily adopted with the potential to improve firms' environmental disclosure and environmental performance, which will boost the value relevance and enhance their reputation and standing.This scenario would benefit emerging markets such as Jordan that have yet to develop or adopt particular rules concerning environmental reporting.Furthermore, global reporting requirements like the GRI guidance might be significantly relied upon and trusted by policymakers because this guidance is globally accepted and adopted in numerous advanced and emerging nations.Alipour et al. (2019aAlipour et al. ( , 2019b) also emphasized this latter recommendation.

CONCLUSION
The aim of this study was to investigate the relationship between environmental disclosure and value relevance based on the Ohlson model while also exploring the influence of environmental performance on this relationship and drawing on economic and legitimacy motivations (voluntary disclosure theory and legitimacy theory).The study sought to address a gap in the previous research, which focused on the direct impact of environmental disclosure on either firm performance or value.However, it did not consider the combined effect of environmental disclosure and performance on value relevance.
This study examined Jordanian industrial companies listed on the Amman Stock Exchange between 2018 and 2021 as a sample of developing countries and emerging markets.
The findings revealed a significant and positive association between environmental disclosure and value relevance.Additionally, it was found that the positive impact of environmental disclosure on value relevance was further strengthened when companies demonstrated robust environmental performance.In other words, firms with superior environmental performance enjoy improved market perception and greater value relevance.
Other variables within the Ohlson model, such as earnings and book value of equity, were found to positively influence value relevance.The study also analyzed control variables like firm size and leverage and found that these variables significantly affected value relevance, with firm size negatively impacting value relevance.However, when controlling for the industry and year effects, the results remained consistent, except for leverage, which no longer significantly influenced value relevance.
Without specific environmental reporting rules in Jordan, global reporting requirements like the Global Reporting Initiative could be relied upon.Stakeholders can utilize reliable environmental information to make informed decisions, ultimately improving the firm's financial performance and value relevance, as preferred by stakeholders.
The study recommends that companies conduct practical assessments of both the environmental and financial performance to develop strategies to enhance their market reputation and attract investments while promoting sustainability and environmental responsibility.On the other hand, investors should consider environmental disclosure and performance as vital factors in their decision-making process.
Integrating these factors into their valuation models can empower them to make sound investment choices.
Future research could focus on small and medium-sized entities, explore the impact of environmental performance on other dependent variables like sustainability or competitive advantage, and investigate the influence of other social aspects within the Global Reporting Initiative Standards on market-based proxy measures.Additionally, examining the role of technological advancements in enhancing the reliability and availability of environmental information might provide valuable insights.

Figure 1
Figure 1.Research model

Table 1 .
Number of firms by industry Ohlson model is as follows:

Table 3 .
Descriptive analysis of study variables Note: VR = Value relevance; FVCE = Fair value of common equity; BVE = Book value of equity; ED = Environmental disclosure; EP = Environmental performance.

Table 6 ,
Model 1, presents the findings related to the interactive effect of environmental performance on the influence of environmental disclosure on the value relevance related to the second hypothesis.

Table 5 .
Regression analysis to examine the impact of environmental disclosure on value relevance

Dependent variable: VR measured by BVCE Variable Predicted sign Model 1 Model 2 Coefficient Prob. VIF Coefficient Prob. VIF
Note: FVCE = Fair value of common equity; EP = Environmental performance; ED = Environmental disclosure; BVE = Book value of equity.***, **, and * point to statistical significance if Prob.value is less than 1%, 5%, and 10%, respectively.Model 1 before controlling year and industry effects, and model 2 after controlling these effects.

Table 6 .
Pedron et al. (2021)), Fazzini and Dal Maso (2016),Pedron et al. (2021), and Regression analysis to examine the impact of environmental disclosure on value relevance and the impact of environmental performance on this relationship Note: FVCE = Fair value of common equity; EP = Environmental performance; ED = Environmental disclosure; BVE = Book value of equity.***, **, and * point to statistical significance if Prob.value is less than 1%, 5%, and 10%, respectively.Model 1 before controlling year and industry effects, and model 2 after controlling these effects.