The mirror effect: influence of national governance on environmental disclosure in coordinated economies

Abstract

Purpose Based on the approach of the varieties of capitalism, this paper aims to investigate the influence of national governance characteristics on environmental disclosure. Design/methodology/approach This research analyzed companies based in coordinated economies, i.e. 1,815 companies from Austria, Belgium, Denmark, Finland, France, Germany, Italy, Japan, The Netherlands, Norway, Portugal, Spain and Sweden were investigated for the period 2009–2018. The authors created an index to measure environmental disclosure, and national governance was measured using the United Nations governance indicators. Findings The findings show that countries with greater transparency, democracy, citizen participation and government effectiveness tend to have companies with a greater environmental concern. The results allow us to conclude that the responsible behavior of companies is a mirror of the governance environment of the country where they operate. The findings have managerial implications. Practical implications Firms must be aware that institutional factors can influence their business. In institutional structures with low government effectiveness, little confidence in social rules and high levels of corruption, corporations tend to be less ethical. Originality/value This research used the varieties of capitalism approach to explain companies’ environmental disclosure. This is a recent approach to the institutional theory, and little explored in previous studies. Institutional level variables, such as governance indicators, can be used in other studies that analyze the relationship between institutional environment and corporate disclosure.