Revisiting sustainability disclosure theories: Evidence from corporate climate change disclosure in the United States and Japan

Motivated by the novel viewpoint that the two major corporate sustainability disclosure theories - that is, legitimacy theory and voluntary disclosure theory - are not exclusively competing, this study re-evaluates the two theories using our quality-based climate disclosure measures developed based on the 2018 CDP (formerly Carbon Disclosure Project) questionnaire. From Tobit and ordinal logistic regression analyses with the public chemical firms in the United States and Japan, we document that firms with higher greenhouse gas (GHG) emissions are more likely to choose extensive low-quality climate change disclosure rather than high-quality. This finding supports the legitimacy theory that firms tend to utilize low-quality climate change disclosure to obfuscate and legitimize their GHG emissions. However, we do not find evidence supporting the voluntary disclosure theory that superior performers prefer extensive high-quality climate change disclosure rather than low-quality. This paper contributes to the literature by providing new theoretical insights on whether and how firms utilize quality-based climate change disclosure strategies in an attempt to achieve the goals accompanied by the two theories. Furthermore, our findings provide an important practical implication for regulators and policymakers that more concrete and stringent climate disclosure rules could effectively curb inferior performers' discretionary behavior to engage in low-quality disclosure.