Manipulative Environmental Disclosure: Further Analysis of Corporate Projections of Environmental Capital Spending

Abstract

ABSTRACT: Following Patten (2005), we focus on corporate disclosure of environmental capital expenditure projections and spending, and address two separate issues related to the corporate use of manipulative disclosure. First, we investigate whether potential increases in oversight and accountability due to the passage of the Sarbanes-Oxley Act (SOX) in 2002 and the issuance of the Governmental Accountability Office's (GAO 2004) report on its investigation of corporate environmental disclosure may have induced firms to be less egregious in their use of overspending projections. Second, given the flexibility in the disclosure requirements, we explore whether, within the sample of companies providing projections of environmental capital spending, greater legitimacy exposures are associated with differences in the use of language within the disclosures. We find, first, that while the incidence and severity of over-projections of environmental capital spending decreased following the GAO (2004) report, the ch...