Mandated environmental reporting and its association with voluntary disclosures, corporate governance and earnings quality

This study investigated the relationship between mandated environmental legislation and listed companies' financial and non-financial reporting quality. The findings are consistent with the following for legislation-affected companies: i) extensive voluntary disclosures are used as a means to mitigate external legitimacy threats; ii) higher emissions are associated with higher levels of earnings management; and iii) extensive voluntary disclosures are associated with lower levels of earnings management. These relationships are not present for non-affected companies. Policy implications include that the Government needs to consider the relationship between voluntary and mandated environmental disclosures and their association with financial and non-financial reporting quality.