Abstract:
The objective of this paper is to examine how managers’ perceptions regarding stakeholders’ value and
purpose of response relate to companies’ environmental disclosure. The study employed legitimacy and
stakeholder theories as the basis for explaining environmental reporting practices. Of 134
environmental disclosing public companies, 99 (74%) companies were selected by using proportionate
stratified random sampling by business sectors. The questionnaire was addressed to the executives
responsible for the environmental management and reporting for enquiring about important stakeholder
via three dimensions of power, legitimacy and urgency and purpose of response through the lens of
gain, maintain and repair legitimacy. Representing 84%, responses from these managers were then
contrasted with companies’ quality of environmental disclosure, which was measured by using
Clarkson et al.’s (2008) environmental disclosure index that was prepared based on Global Reporting
Initiative (GRI) guidelines as well as quantity of environmental disclosure, which was measured using
number of sentences. Descriptive statistics, correlation and regression were used to analyze the
collected data. Findings of the study show that there are moderate associations between the managers’
perception on various stakeholders and purpose of response. Most important stakeholders are
government, shareholders, and environmentalists while least important stakeholders are competitor and
supplier in the decision to disclose environmental information. Further, results reveal that the core
purpose of disclosing environmental information by companies is maintaining legitimacy than gaining
or repairing legitimacy. Management is also motivated by level of companies’ income for disclosing
environmental information. Around 27% and 23% of variation in dependent variables quality as well as
quantity of environmental disclosures could be explained by encompassing all independent variables. It
is concluded that managerial perception on various stakeholders regarding environmental performance
is reflected on companies’ environmental disclosure for maintaining legitimacy and achieving social
recognition. The results of the study would enable the companies, regulators and other stake holders for
planning their environmental performance and disclosure in order to achieve sustainable development.
