The Association between Mandated Environmental Liability Recognition and Voluntary ESG Disclosure Quality
By Daniel A. Bens, Cai Chen & Peter R. Joos We examine the association between mandated Asset Retirement Obligations (ARO), i.e., environmental clean-up costs of normal operations estimated on the balance sheet, and the quality of voluntary ESG disclosures. We hypothesize that when firms recognize larger AROs with higher accuracy that this effort will spillover into enhanced voluntary disclosure of a broad range of ESG outcomes. Empirical evidence supports this hypothesis. In a sample of environmentally sensitive industries, we find...
