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Paper #40

Thursday 6th August
11:30-13:00
Session 7 Room 2

Rapid industrialisation and recent haze conditions caused by forest fires in Indonesia have heightened awareness among Singaporeans of the need to maintain a cleaner and safer environment. Yet the discretion of Singapore companies to make environmental disclosures in the annual reports results in significant variations in the extent and types of disclosures. Previous Singapore studies, already quite limited, addressed corporate social responsibility and social disclosures in general. This study therefore investigates the relationship between environmental disclosures and financial performance using a sample of potentially polluting publicly-listed companies in Singapore. The issue is examined from several perspectives: (a) if there is any difference in financial performance between disclosing and non-disclosing companies of environmental information, (b) whether extent of environmental disclosure can be linked to financial performance, and (c) if there is any impact of prior financial performance on subsequent environmental disclosures, and vice versa. Results showed that a positive link existed although the evidence was less strong for the impact of environmental disclosures on subsequent financial performance. All null hypotheses were rejected. This finding should encourage Singapore companies to increase the content of their environmental reporting in annual reports. This is important in order to expose pollution-prone companies to a wider spectrum of stakeholders on their role to achieve a cleaner and greener environment. The annual report is the most easily accessible source in Singapore to convey corporate activities and intentions, in the absence of any non-profit organisations like in the United States which regularly publish information on the social performance of companies.

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