The relationship between Hofsted’s national cultural values and corporate environmental disclosure: an international perspective

In Turkey and most other countries, there are many of organizations that have both social and economic objectives. These organizations may include non-­‐profit organizations, co-­‐operatives, social enterprises, other for profit with environmental and social obligations, and public sector organizations. At the same time the countries around the world became collectively dealing with environmental crises by formulating and enacting rules and regulations to sustain the environment. This paper involves a cross-­‐cultural comparison of the effect of national culture values on corporate environmental disclosure (CED) within the annual reports of sample consist of about 655 large companies from 20 countries based on Gray’s (1988) classification methodology of cultural areas. We focus on the 2012 environmental disclosures within six industries are automobiles, chemicals, foods, metals and mining, oil and gas, and pulp and paper. In this paper we utilized the content analysis technique which is a research method for making replicable and valid inferences from data to operationalize the voluntary environmental disclosure variables. The findings indicate that two of Hofstede’s national culture dimensions are linked to a higher degree of corporate environmental disclosure. In particular, a nation’s high degree of individualism and long-­‐term orientation were both related to high level of corporate environmental disclosure. While one of Hofstede’s national culture dimensions is linked to a low degree of corporate environmental disclosure. The nation’s high degree of power distance was related to low degree of corporate environmental disclosure. The control variables (regions, industries and firm size) were significantly related to corporate environmental disclosure. 1. INTRODUCTION The environmental accounting and reporting can be considered one of the modern topics that have entered to the attention of companies and in business sector, it indicates environmental cost account of any economical businesses of the country or on one region or on the whole world, this concept has been generated in accounting thought as a result of the perception of the business organizations that its role must not be productive, and trying to gain profit only, but that there is a responsibility and social and environmental goals that should be obligated by the industrial companies towards the society and the environment. Over the past few years researches in the field of environmental accounting dominate the social accounting literature, and the predominant is represented by national practices or regulations on environmental accounting. Internationally, there are several Year: 2014 Volume: 1 Issue: 3 nations that are leaders in social and environmental reporting practices. For example, Scandinavian countries and the Netherlands have mandatory corporate environmental performance reporting requirements. In the US, companies have to submit emissions data to the Environment Protection Authority, which is made publicly available. The US Securities and Exchange Commission, Canada’s Securities Commission and the UK Companies Act require the disclosure of social and environmental information that affects current or future financial performance. The influences of culture are pervasive and underlie nation’s institutional arrangements; all organizations exist within cultural contexts. Gray (1988) hypothesized that cultural values influence a country’s accounting system and disclosure practices. As a result, examining societal values or culture would be helpful in identifying countries that would have different perceptions of a company’s stakeholders and their influences on a corporation’s environmental disclosure practices. Therefore, the purpose of this paper is to investigate whether corporate environmental disclosure levels relate to national culture values depending upon Hofstede’s individualism, masculinity, power distance, uncertainty avoidance, and long term-­‐orientation dimensions. In , this study applies Hofstede’s cultural value theory to investigate cultural effects on Corporate Environmental Disclosure practices. The remainder of this paper covers the literature review, and then the research methodology and data analysis are presented and discussed, while the last part discusses the findings and resulting conclusions. 2. LITERATURE REVIEW The literature review sheds light on the variety of studies examining the effect of cultural orientation in various accounting disciplines. The results of most empirical studies contribute to supporting the accounting literatures related to environmental disclosure forms, the effects of the national cultural variations on financial reporting generally, and documenting the association between the national cultural orientation and the organizations’ attitudes toward voluntary environmental disclosure, and managers’ decision-­‐making with regard to environment protections activities. Many studies try to investigate the factors affecting corporate environmental disclosures (e.g. Bewley and Li (2000), Liu and Anbumozhi (2009), Sun et al. (2010) ,Zhongfu et al. (2011), De Villiers and Van Staden (2012), and Bowrin (2013). In this context, Bewley and Li (2000) examine factors associated with the environmental disclosures in Canada from a voluntary disclosure theory perspective. The authors measure environmental disclosures by 188 Canadian manufacturing firms in their 1993 annual reports using the Wiseman index. The study finds that firms with more news media coverage of their environmental exposure, higher pollution propensity, and more political exposure are more likely to disclose general environmental information, suggesting a negative association between environmental disclosures and environmental performance. Liu and Anbumozhi (2009) identify the determinant factors affecting the disclosure level of corporate environmental information on the basis of stakeholder theory, and give an empirical observation on Chinese listed companies. They find that the Environmental Information Disclosure (EID) strategy of Chinese listed companies is oriented to fill up the government’s environmental concerns and the corporate EID effort is significantly associated with its environmental sensitivity and its size. While the role of other stakeholders, like shareholders and creditors in effecting the EID still weak. Sun et al. (2010) examine the association between corporate environmental disclosure (CED) and earnings management (EM) and the impact of corporate governance (CG) mechanisms on that association. They use performance-­‐matched discretionary accrual (DA) as a measure of EM for a sample of 245 UK non-­‐financial firms for the financial year ended on March 2007. Three different theoretical frameworks are used to identify the expected association between CER and EM. These include: signaling, agency and stakeholder-­‐legitimacy theories. They find no significant statistical association between various measures of DA and environmental disclosure. At the same context, Zhongfu et al. (2011) find that environmental information disclosure has a positive effect on economic performance, as is shown that enterprises which sufficiently disclose their environmental information have better economic performance. Bowrin (2013) finds that the level of SED in the Caribbean was relatively and the amount of SED was positively related to firm size, industry affiliation, foreign influence and organizational culture. Other studies emphasized on the relation between environmental performance and corporate environmental disclosure (e.g. Hughes et al. (2001), Patten (2002), Al-­‐Tuwaijri et al. (2004), Clarkson et al (2007), Cho et al. (2010), and Iatridis (2013)), most of these studies found a positive relation between environmental performance and corporate environmental disclosure. As discussed above, the environmental disclosure has affected by internal and external consequences; however, these studies contain implicit indication that there is a differences in the extent to which the companies disclose their environmental information, these difference can be attributed to the social, legal, or cultural differences among countries. The impact of

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