The Impact of National Cultural Values on Environmental Reporting: a Comparative Study

Abstract

The countries around the world became increasingly dealing with environmental issues, because the environmental issues have constituted a problem that concurrently affects humans, nations and corporations. This paper investigates the impact of the differences in national cultural values on the extent to which the companies disclose their environmental performance information. This cross-cultural comparison based on the National cultural values (as suggested by Hofstede, 1980, Hofstede, 2001, and Hofstede et al., 2010), which include Individualism, Power distance, Uncertainty avoidance, Masclulinty, Long term Orientation, and Indulgence. The sample includes the annual reports of 655 large companies from 20 countries selected from 10 different cultural areas, based on the international classification of accounting systems proposed by Gray S. J., 1988. We utilized the content analysis technique to capture the environmental disclosures of financial year 2012 within six industries are Automobiles, Chemicals, Foods, Metals and Mining, Oil and Gas, and Pulp and Paper. Our results indicate that two of Hofstede's national cultural dimensions are linked to a higher degree of corporate environmental disclosure. In particular, a nation's high degree of individualism and indulgence were both related to high level of corporate environmental disclosure. While one of Hofstede's national cultural dimensions is linked to a low degree of corporate environmental disclosure. The nation's high degree of power distance was related to low degree of corporate environmental disclosure. Other dimensions such as Uncertainty Avoidance, Masculinity, and LTO are not related to Corporate Environmental Reporting. The control variables (regions, industries and firm size) were significantly related to corporate environmental disclosure. As a result, this study will support analysis of foreign markets by understanding the cultural variations throughout different countries within different cultural contexts. Furthermore, the results of the study can be considered as a guide for multinational corporations to evaluate the economic, legal, social situations in different countries when they wish to enter new markets.