Abstract
Purpose The purpose of this paper is to examine the association between corporate environmental disclosure CED and earnings management EM and the impact of corporate governance CG mechanisms on that association. Designmethodologyapproach The paper uses performancematched discretionary accruals DA as a measure of EM. The paper also uses ordinary least square regression with robust standard errors to examine the association between CED and EM for a sample of 245 UK nonfinancial firms for the financial year ended on March 2007. Three different theoretical frameworks are used to identify the expected association between CER and EM. These include signalling, agency and stakeholderlegitimacy theories. Findings The paper finds no significant statistical association between various measures of DA and environmental disclosure. The paper also finds that some CG attributes affect the relationship between CER and EM. Practical implications The result suggests that UK corporate managers are not using environmental disclosure as a technique to reduce the probability that public policy actions will be taken against their companies. Originalityvalue Since most empirical research is limited to the US setting, this paper provides a novel contribution to the existing literature, as one of the first to examine this issue in the UK.