Do financial markets care about social and environmental disclosure? Further evidence and exploration from the UK
Accounting, Auditing & Accountability Journal
ISSN: 0951-3574
Article publication date: 1 March 2006
Abstract
Purpose
The purpose of the paper is to explore whether there is any relationship(s) between social and environmental disclosure and the financial market performance of the UK's largest companies.
Design/methodology/approach
Two data sets were used in the study. The CSEAR database of UK companies provided the social and environmental disclosure component. The second data were the stock market returns earned by the largest UK companies as listed by The Times 1,000. A series of statistical tests was performed to examine whether any relationship could be detected in either the cross sectional or longitudinal data over a period of ten years.
Findings
No direct relationship between share returns and disclosure was found. Neither had such a relationship been expected, in keeping with the prior literature. However, the longitudinal data revealed a convincing relationship between consistently high(low) returns and the predilection to high(low) disclosure. There is no single convincing theoretical explanation as to why this might be.
Originality/value
This paper demonstrates the importance of examining a range of hypotheses on longitudinal data when other research suggests that any relationships are unlikely to be unstable year on year. More significantly, this paper is motivated not by a concern to understand better how investors' already‐high returns may be bettered, but rather to explore how the alleged potential of financial markets to contribute to social responsibility and sustainability might be engaged.
Keywords
Citation
Murray, A., Sinclair, D., Power, D. and Gray, R. (2006), "Do financial markets care about social and environmental disclosure? Further evidence and exploration from the UK", Accounting, Auditing & Accountability Journal, Vol. 19 No. 2, pp. 228-255. https://doi.org/10.1108/09513570610656105
Publisher
:Emerald Group Publishing Limited
Copyright © 2006, Emerald Group Publishing Limited