Social and Environmental Accounting Information Disclosure Quantity
The research technique commonly used in evaluating the quantity of corporate social and
environmental disclosure is content analysis. Content analysis is considered as the fastest
growing technique in quantitative research method. Content analysis of annual report is a method
of gathering data which involves codifying qualitative and quantitative information into predefined categories in order to derive pattern in the presentation and reporting of information
(Guthrie & Abeysekere, 2006). It allows corporate environmental information to be
systematically classified and compared (Uwuigbe, 2011). The main advantages of content
analysis as noted by Aburaya (2012) relate to reliability, objectivity, external validity and
volume of data. A distinguishing feature of content analysis is that data are coded and measured
in a reliable and systematic manner (Krippendorff, 1980).
Social and environmental disclosure content analysis involves the construction of classification
scheme and establishing a set of decision rules for coding, measuring and recording the data
being examined (Milne & Adler, 1999). Specifically, its technique requires determining the
documents to be used in the analysis (annual report, stand-alone or any other communication
media), defining corporate social and environmental disclosure and its categories, the unit of
analysis and the reliability of the content analysis techniques (Hassan, 2010; Aburaya, 2012).
Corporate annual reports are formal public documents that incorporate both statutory and
voluntary disclosure; can be accessed more easily than other media; and are widely recognized as
the principal means for communicating corporate activities and intention (Wiseman, 1982).
Thus, majority of the literature uses annual report as the principle focus of disclosure (Hossain,
Islam & Andrew, 2006; Barako, 2007; Uwuigbe, 2011). Annual report is a statutory document
that is produced regularly. It is the main path for transmission of communication of environmental and social information from the companies to their stakeholders; and thus are
more formal, authoritative and accurate for researchers (Zhang, 2013).
The methods used in content analysis studies to quantify disclosure are number of words (Davey,
1982; Deegan& Gordon, 1986; Suttipun& Stanton, 2012), number of sentences (Milne & Adler,
1999; Hassan, 2010; Buniamin, 2010; Uwuigbe, 2012), proportion of pages (Haron, Ismail
&Yahya, 2008; Hassan, 2010) and self-constructed disclosure index (Cormier, Magnan &
Velthoven, 2004; Umoren & Okougbo, 2011). Self-constructed disclosure indices can be
weighted or un-weighted. Both weighted and un-weighted disclosure index are usually used to
determine the extent of disclosure by various companies. Researchers such as Cormier, Magnan
and Velthoven (2004), Barako (2007) and Takhtaei and Mousavi (2012) used weighted
disclosure index. This approach involves the application of weight to different items in the
disclosure check list. The weights reflect the importance attributed by different classes of users
to each disclosure item.
On the other hand, researchers such as Kokubu, Noda, Onishi and Shinabe (2001), Hossain,
Islam and Andrew (2006), Galani, Gravas and Stavropoulos (2011) and Uwuigbe (2013) used
un-weighted disclosure index approach. This is a dichotomous procedure of scoring in which a
score of one (1) is awarded if the item is disclosed and Zero (0) if not disclosed. The underlying
assumption in the un-weighted approach is that all items of information in the index are
considered equally important to the average users. Un-weighted indices by construction can only
measure the quantity of disclosure. In order to appreciate quality of disclosure, items are
weighted according to predefined rankings defined by the researchers (Aburaya, 2012).
The concept of quality is a disputed topic in academic literature and in contemporary philosophy
which has different meaning to different people (Aburaya, 2012). Disclosure quality is defined as
the extent to which current and potential investors perceived information easily (Hopkins, 1996).
International Organizations for Standardization (ISO 9000) defined quality as a degree to which
a set of inherent characteristics fulfills requirement. Beattie et al. (2004) as cited in Hassan
(2010) indicated that there are two principle ways to measure quality of disclosure: use of
subjective analyst disclosure quality ranking; and use of researcher-constructed disclosure
indices, in which the amount of disclosure is used as a proxy for disclosure quality. In
determining disclosure quality, Cormier, Magnan and Velthoven (2004) asserted that
management should considers the institutional framework of the company by focusing attention
to what other companies either in the same industry or in the same country do in that respect.
They should also consider what the company has done in the past as well as relevant regulations
and laws governing disclosure.
Prior literature on social and environmental disclosure used various ranking system to determine
the quality of disclosure in annual reports. Different point scales were used for assessing the
quality of disclosed information. Cormier, Magnan and Velthoven (2004) used rating based on
the score of one to three.
Three for items described in quantitative terms, two where an item is
described specifically and one for an item described in general terms. Yusoff and Lehman (2005)
used rating base on the score of one to four; general information, qualitative information,
quantitative information and combination of both qualitative and quantitative information
respectively. Similarly, Barako (2007) proposed qualitative disclosure measure which denotes
weight for different disclosure items based on the perceived importance of each item to various
user categories; weight four to three were assigned where the information provided is highly essential, weight three to a very important, weight two moderately important, weight one slightly
important and zero to un-important. Hassan (2010) and Petrova, Sotiropoulos and Vasileious
(2012) suggested a two-point scale system in assessing the quality of social disclosure in annual
report, one, if disclosure is quantitative, graphs or narrative which reports the policies and
activities of a company concerning its social responsibility, and zero otherwise.
Yao, Wang and Song (2011) on their part used rating base on the score of two if an item is
disclosed in great detail. For instance where company discloses a detail plan, estimated
expenditure or main development related to environmental protection, a score of one is awarded
if an item is disclosed qualitatively without detail explanation, if no related information is
disclosed the score is zero. Cormier, Magnan and Velthoven (2004) noted that, the use of coding
scale to qualify a firm‟s social disclosure is appropriate because it allows for integration of
different type of information into a single figure that is comparable across firms in terms of
relevance. The process of reading and of coding a firm‟s annual report leads to the computation
of comprehensive disclosure quality. Aburaya (2012) argued that as long as quality measurement
is intended a weighted index is deemed appropriate in order to differentiate between varying
degree of disclosure quality. The quality of disclosed information is assessed by assigning weight
and defining scores that vary according to the distinct nature of the disclosed items.
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