A Comparative Analysis of Environmental Risk Disclosure in German and UK Companies (2006)

Potential and actual threats to the environment have made environmental risk disclosure by companies gain currency over the recent years. This study examines whether making risk reporting mandatory increases the quantity, nature and patterns of environmental risk disclosed. Using content analysis based on the annual reports, German companies, which have mandatory requirements on risk reporting, and the United Kingdom (UK) companies, which disclosed risk information voluntarily, are analysed.

The findings show that the German companies did not disclose more environmental risk information on the overall as compared with UK companies. The results also show that good news and non-monetary aspects, that mainly boost corporate image, are the most disclosed in both Germany and UK companies. The environmental risk disclosed in both German and UK companies is inadequate, lacks forward-looking information, lacks quantification in monetary terms and the bad news seems suppressed.

This suggests that there is a strong relationship between environmental risk reporting and protection of the corporate image which, to a large extent, is consistent with the legitimacy theory in explaining the rationale for companies to disclose environmental risk information. The author concludes that to increase environmental risk reporting:

  • Companies should desist from taking a one-size fit all approach to risk reporting. Rather, a hybrid strategy is recommended to ensure innovations are not stifled.
  • Harmonisation of the accounting standards on risk reporting to reduce competitive disadvantage incurred by companies disclosing.
  • Changing attitudes towards environmental risk issues through educating and training managers.
  • Government provide incentives to encourage environmental risk reporting
  • 15,000 words – 64 pages in length
  • Good use of literature
  • Good analysis of subject area
  • Well written throughout
  • Ideal for finance students

1: Introduction
Background to Environmental Risk Disclosure
Rationale for the study
Research Question and Objectives
Usefulness of the research
Arrangement of the sections of the study

2: Literature Review
Environmental risk
Environmental risk management
Use and Usefulness of Environmental Risk Disclosure
‘Right to Know’ Equity investors and other Stakeholders
Lenders requirements
Lowering cost of capital
To Attract Ethical investors
Environmental risk disclosure and Financial Performance
Audiences for risk disclosure
Nature of Environmental Risk Disclosure
Argument for and against Voluntary Disclosure
Argument for Mandatory Disclosure
Environmental risk; Voluntary or Mandatory Disclosure
Environmental Risk Disclosure Theory
Legitimacy theory
Legitimacy theory and environmental risk disclosure
Empirical evidence using Legitimacy theory
Nature of news made voluntarily in annual reports
Empirical evidence of types of news disclosed by companies
An overview of Germany and UK risk disclosure regulations
Law and Legislation
Accounting standard on risk
Other contextual factors that may influence extent of environmental risk disclosure
Corporate governance in UK and German
Germany and UK in the international accounting context
Annual Report as a Vehicle for Communicating Environmental Risk
Summary of the Literature Reviewed
Hypothesis Formulation

3: Research Methodology
Choice of Methodology
Sampling procedure
Data collection
Data Counting Method
The coding instruments
Validation of research instrument
Limitations of the method
Statistical analysis

4: Data Analysis and Findings
Comparison of descriptives of total disclosure in German and UK companies
Comparison of the disclosures of sample industries in Germany and UK
Comparison of type of news within countries (Germany and UK)
Comparison of news between German and UK companies
A comparison of the five environmental risk categories
Content analysis
Content analysis of environmental risk disclosures in UK sample companies
Evaluation of the Hypothesis

5: Discussion of Findings
Mandatory and voluntary disclosure versus level of disclosure by companies
Mandatory and voluntary disclosure versus corporate image
Voluntary and mandatory disclosure versus the types of news
Voluntary and mandatory disclosure versus monetary information
Voluntary and mandatory disclosure versus Environmental risk categories information
Mandatory and voluntary disclosure versus (business) costs

6: Conclusion
Conclusions drawn from the study
Shortcoming of mandatory risk disclosure
The way forward
Review of the method and possible improvements

References and Bibliography

Environmental risk coding manual/grid
Coding Schedule
Sample size and sales turnover
Environmental risk Industries

Environmental Risk Disclosure in German and UK Companies
Environmental Risk Disclosure in German and UK Companies

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