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

  • Received March 31, 2023;
    Accepted September 7, 2023;
    Published September 18, 2023
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/ee.14(2).2023.06
  • Article Info
    Volume 14 2023, Issue #2, pp. 69-86
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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.

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    • Figure 1. Research model
    • Table 1. Number of firms by industry
    • Table 2. Definitions of variable and source
    • Table 3. Descriptive analysis of study variables
    • Table 4. Pearson correlation coefficient
    • Table 5. Regression analysis to examine the impact of environmental disclosure on value relevance
    • Table 6. Regression analysis to examine the impact of environmental disclosure on value relevance and the impact of environmental performance on this relationship
    • Table A1. Variables included in environmental disclosures and environmental performance indices
    • Conceptualization
      Mohammad Saleh Altarawneh
    • Data curation
      Mohammad Saleh Altarawneh
    • Formal Analysis
      Mohammad Saleh Altarawneh
    • Investigation
      Mohammad Saleh Altarawneh
    • Methodology
      Mohammad Saleh Altarawneh
    • Project administration
      Mohammad Saleh Altarawneh
    • Resources
      Mohammad Saleh Altarawneh
    • Software
      Mohammad Saleh Altarawneh
    • Validation
      Mohammad Saleh Altarawneh
    • Writing – original draft
      Mohammad Saleh Altarawneh
    • Writing – review & editing
      Mohammad Saleh Altarawneh