Extending the application of stakeholder theory to Malaysian corporate environmental disclosures

The central thesis in this research is that voluntary environmental disclosures are used by corporate entities to manage their stakeholders. This is in accordance with the basic proposition of stakeholder theory which states that the firm’s success is dependent upon the successful management of the relationships that firms have with their stakeholders (Freeman 1983). Hence, the position taken in this investigation is that corporate managers will voluntarily provide environmental disclosures according to the demands of their ‘salient stakeholders’ (Mitchell, Agle & Wood 1997). Corporate environmental disclosures, therefore, are perceived as part of the dialogue between the firm and its salient stakeholders. Given the limited application of stakeholder theory in the area of environmental disclosure and the scarcity of studies conducted from the context of developing countries, much of this study is concerned with exploring ideas as to how stakeholder theory can be further refined and applied in the Malaysian context, the focus of this investigation. The purpose of this study is three-fold: (1) to identify the determinants of Annual Report environmental disclosures of Malaysian publicly listed companies using the stakeholder model; (2) to understand the corporate motives for providing such disclosures; and (3) to apply and refine stakeholder theory by developing a framework that can be used to analyse environmental disclosures prepared for and/or required by its stakeholders in the Malaysian context. These purposes call for a mix of descriptive, analytical/explanatory and exploratory type of research necessitating an appropriate mix of both quantitative and qualitative methods. Data are collected in three distinct phases. Phase 1 is quantitative, using the ordinary least squares (OLS) method for analysis. The purpose here is to document the current Annual Report environmental disclosure practices of Main Board listed Malaysian companies using Ullmann’s (1985) stakeholder model. Phase 2 is qualitative, using semi-structured and unstructured interviews as well as perusing relevant website and media reports. The aim is to find explanations to Phase 1 quantitative findings and to explore how stakeholder theory can be further refined and applied in the Malaysian context. The findings led to the conclusion that for Malaysian companies to actually show their concern for the environment and to provide environmental disclosures in their Annual Reports, the demand must come from their salient stakeholders. While Phases 1 and 2 attempt to describe and understand the ‘real-world’ environmental reporting and business practices of Malaysian firms, Phase 3 uses fictitious vignettes based on real-life Malaysian corporate scenarios from which various representatives of stakeholder groups are asked to comment. Structured interviews, using a combination of closed and open-ended questions, are conducted to collect the data for this phase. The primary purpose here is to explore the application of stakeholder theory while seeking explanations on the intricacies involved in the decision to provide environmental disclosures. In the main, the findings confirm the suitability and usefulness of the stakeholder framework developed in analysing corporate environmental disclosures from the context of a developing nation particularly Malaysia.