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Borsa Istanbul Review 22-5 (2022) 886–896
http://www.elsevier.com/journals/borsa-istanbul-review/2214-8450

Full Length Article

Determinants of corporate carbon disclosure: A step towards sustainability

reporting
Rajesh Desai
School of Liberal Studies, Pandit Deendayal Energy University, Gandhinagar, Gujarat, India
Received 23 February 2022; revised 24 June 2022; accepted 24 June 2022
Available online 3 July 2022

Abstract

Present research is aimed to examine the factors affecting the disclosure of corporate carbon emission. Investors, especially shareholders,
largely rely upon the disclosure of financial and other data to determine the firm value. However, disclosure of environmental performance such as
carbon emission is still underdeveloped in many emerging economies including India. Using data of 141 Indian companies for a period of seven
years (2014–2020), the study examines the effect of financial, industrial, and market-based factors on disclosure of carbon emission with the help
of binary logistic regression. Further, the results are also checked for robustness using generalised method of moments (GMM) estimates to
control endogeneity. Results convey that size, profitability, leverage, and market value are major determinants of carbon disclosure for the sample
firms. Further, it is also found that propositions of legitimacy and information asymmetry theory are partly applicable in emerging context. Present
research will assist managers and practitioners to devise their disclosure policy and it will also add value to the existing environmental research,
especially in emerging economies.
Copyright © 2022 Borsa İstanbul Anonim Şirketi. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).

JEL classification: M48; M40; Q56; Q51

Keywords: Sustainability reporting; Carbon disclosure; Emerging

1. Introduction from theories like legitimacy (Patten, 1991), information

In modern epoch, disclosure of environmental performance
should be considered at par with the financial disclosure to
sustain the ‘agency relationship’ among the managers and in-
vestors. On the contrary, though industrial activities are
constantly deteriorating the natural resources and the global
atmosphere, disclosure of environmental information such as
carbon emission has not been completely integrated with
financial reporting standards (Gupta and Goldar, 2005). Thus,
voluntary disclosure is the only option available to stakeholders
to evaluate the effect of business operations on the environment
(Bauer & Hann, 2010; Chaklader & Gulati, 2015). Theoreti-
cally, the fundamentals of carbon disclosure can be extracted
E-mail addresses: rajesh.desai@nirmauni.ac.in, rajesh.desai8@gmail.com.
Peer review under responsibility of Borsa İstanbul Anonim Şirketi.
asymmetry (Healy & Palepu, 2001), and hypothesis of risk
avoidance (Owen, 1992). Legitimacy and information asym-
metry theories advocate that firms should disclose their carbon
data to the public as it assists firms to legitimatise their opera-
tions (Brammer & Pavelin, 2006) as well as narrow the gap
between the information available to managers and stakeholders
(Chen & Jaggi, 2000). On the contrary, risk aversion proposi-
tion states that firms may hesitate to share any additional in-
formation about carbon emission, except when mandatory, due
to uncertain reactions of shareholders. Besides, it may put their
security and privacy at risk as compared to their competitors
(Owen, 1992; Wang et al., 2021). Further, according to agency
theory, disclosure of emission data can invite additional mon-
etary as well as implied cost such as shareholders' reaction
(Guidry & Patten, 2012) so such disclosures are subject to the
cost-benefit analysis. Provided the contrasting corollaries,

https://doi.org/10.1016/j.bir.2022.06.007
2214-8450/Copyright © 2022 Borsa İstanbul Anonim Şirketi. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://
creativecommons.org/licenses/by-nc-nd/4.0/).
R. Desai
managers are incredulous about whether to disclose carbon data
or not, especially when they have discretion to do so.
Past studies from Hughes et al. (2001), Deegan et al. (2002),
Campbell (2003), Clarkson et al. (2008), Reid and Toffel
(2009), Hooks and van Staden (2011), Stanny (2012), Choi
et al. (2013), and Barbu et al. (2014) have examined the
impact of firms' financial characteristics on the environmental
disclosures but most of them have focused on developed
countries. At the same time, companies operating in emerging
economies are gradually espousing the voluntary disclosure
practices in response to pressure from investors and other
stakeholders (Bauer & Hann, 2010; Li et al., 2014). Yet, there
is a dearth of conclusive research about the factors that moti-
vate firms to voluntarily disclose their carbon emission espe-
cially in emerging context. Further, disclosure norms of
developed and emerging nations differ significantly as devel-
oped economies are compelled to reduce the global emission
levels (Manrique and Martí-Ballester, 2017) and therefore, they
have enforced mandatory disclosure requirements to steer the
environmental performance of corporates. On the contrary, the
developing countries do not have any such imposition to
reduce and regulate the carbon emission which results into
absence of regulatory disclosure framework (Kumar & Firoz,
2018) or a weak framework encumbered with gaps
(Blackman, (2010), p. 234; Wang et al., 2021). Hence,
considering the structural and regulatory differences, a separate
investigation for emerging economies is essential before gen-
eralising the outcome of studies focussing on developed
countries. Therefore, present study explores the carbon
disclosure behaviour of firms and analyse the impact of firms'
characteristics on the same. Further, the study will add value to
the existing literature by answering the below mentioned
research questions (RQ).
RQ 1: What are the factors that affect the disclosure of
corporate carbon emission in the context of an emerging
economy?
RQ 2: Which theories of carbon and/or environmental
disclosure are applicable in the context of an emerging
economy?
Considering the limited exploration of carbon disclosure
research, the study has several important contributions to make.
First, the present research focuses on India, which is one of the
fastest developing countries of the globe and the second largest
growing economy in the Asian continent after China. Though
few research studies have examined the effect of firm-specific
characteristics on carbon disclosure in emerging economies
(Chaklader & Gulati, 2015; Halimah & Yanto, 2018; Akbas
and Canikli, 2019) but the results are not conclusive which
necessitate further probing. Secondly, apart from financial
statement-based variables, present research also includes fac-
tors such as market value and industry affiliation that are often
ignored in past studies. Thirdly, the study is based on binary
logistic regression approach to provide reliable results as
against Kumar and Firoz (2019) who used panel regression for
similar research. As the dependent variable (carbon disclosure)
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is a dichotomous one, binary logistic regression is suitable
approach (Poonam & Chaudhry, 2019). Lastly, the results are
also validated for endogeneity using GMM regression analysis
to improve the reliability of results.
The remainder of the manuscript has been structured as
follows. Section 2 provides the contextual background and
carbon regulatory norms in India. Section 3 highlights the re-
view of environmental disclosure theories and Section 4 em-
braces the review empirical studies and hypothesis
development. Section 5 covers the research methodology of the
study and Section 6 presents the results of data analysis and
discussion. Lastly, Section 7 concludes the study along with
implications, limitations, and future scope of research.
2. Contextual background
Present research focuses on one of the fastest growing econo-
mies of the world, India, which is the fourth largest emitter of
carbon dioxide (CO2) after the USA, China, the European union.
In 2020, Indian firms have reported a total CO2 emission of 703.7
million tons showing an increase of more 135% as compared to
2018 emission level (CDP India Report, 2020). However, though
corporate activities are the largest contributor of total carbon
emission of the country, there is a lack of regulatory framework
specifically to govern the quantity of carbon emission and its
disclosure (Kumar & Firoz, 2018). On the other hand, the country
has committed to lower its CO2 emission by 33–35% from the
2005 level by 2030 (CDP Report, 2019) which seems unattainable
without cooperation of business enterprises. Provided the current
scenario, Indian companies can voluntarily decide to disclose
carbon emission data which results into inconsistent and biased
reporting as companies will disclose the CO2 emission data only if
they perform better than competitors (Clarkson et al., 2011). To
respond to the same, Indian regulators will have to ponder for a
structured framework of environmental reporting that ensures
adequate disclosure of carbon emission. Present research can help
policymakers to identify the factors that motivate or obstruct firms
to disclose their carbon emission data which in turn assist in
drafting the policies such that the motivating factors should be
reinforced and the obstructing factors should be eliminated.
Further, present research can become a base for drafting regulatory
norms as policies based on research evidence can be accepted and
implemented indisputably (Orens et al., 2010; Liu et al., 2016). To
sum up, increasing level of CO2 emission due to energy con-
sumption and production (Parikh and Ghosh, 2009), absence of
regulatory norms on carbon emission and disclosure, and the ex-
pected role to be played to reduce global carbon footprints are
several premises that suggest India as an appropriate country for
current research.
3. Theoretical literature review
Disclosure of non-financial information such as environmental,
governance, and social has been governed by several theories that
predicts the firm's disclosure behaviour based on its characteristics.
Theoretical foundations of corporate carbon disclosure can also be
derived from the propositions of the environmental disclosure
R. Desai
theories which are grouped as socio-political (Gray et al., 1995)
and information asymmetry (Harris & Raviv, 1991).
Socio-political theory has two major anchors represented by
legitimacy theory and stakeholder theory (Hahn et al., 2015).
According to legitimacy premise, company's existence depends
upon the approval of the society as it controls the factors of
production (Cormier et al., 2004) and therefore firms must
operate in accordance with the ‘social contract’ (Patten, 1991).
Corporate disclosure about non-financial information, espe-
cially when activities of firms are believed hazardous to the
environment (Cho and Patten, 2007), aids to ensure that
organizational activities are congruent with the values and
expectations of the society. Therefore, firms voluntarily
disclose carbon emission data in response to social pressure
(Kalu et al., 2016b) and to legitimatise the business operations
(Brammer & Pavelin, 2006). Stakeholder theory, on the other
hand, primarily focuses more upon a particular group of
stakeholders instead of society at large (Berthelot & Robert,
2012). It comprehends that companies, in order to meet the
expectation of stakeholders, disclose more information to
ensure that their interests and expectations will be met by the
business organisation (Alfani & Diyanty, 2019). Environ-
mental disclosures act as a communication between stake-
holders and organisation (Nasih et al., 2019) that garners
support and ensures the sustainability of business (Akbas &
Canikli, 2019). In this context, both – legitimacy and stake-
holder theory – argue that firms will engage in voluntary car-
bon disclosure to legalize their manoeuvres and balance the
expectations of various stakeholders.
Information asymmetry arises due to differences in the in-
formation possessed by managers and shareholders (Healy &
Palepu, 2001; Mangena & Tauringana, 2007). Managers can
narrow these differences by disclosing vital information to
investors (Chen & Jaggi, 2000; Kalu et al., 2016b). Information
asymmetry has been further branched out as signalling and
agency theory (Chithambo & Tauringana, 2014). Signalling
theory suggest that managers will disclose carbon emission
data to enhance company's reputation and provide positive
signal about firms' performance (Ben-Amar et al., 2017; Luo
et al., 2012). Further, companies with better carbon perfor-
mance are more likely to adopt voluntary disclosures so as to
distinguish themselves from poor performers (Toms, 2002). On
the other hand, agency theory commands that disclosure of
information involves costs as well as subsequent outcomes
associated with such disclosures (Guidry & Patten, 2012).
Hence, managers engage into voluntary disclosure only when
the associated benefits are more than that of costs as well as,
when firms possess enough financial resources to afford the
same (Cormier et al., 2005; Toms, 2002).
4. Empirical literature review and hypothesis development
Present section highlights the review of extant literature that
focuses on determinants of carbon disclosure. Further, it also
discusses the development of hypothesis based on theoretical
underpinnings, empirical evidence, and contextual setting.
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4.1. Asset size
According to legitimacy theory, large size firms have high
pressure from public to disclose the non-financial data to
maintain the social contract that enables the firms to access
resources of the society (Knox et al., 2005; Patten, 1991).
Further, stakeholder theory reports that large firms are subject
to greater expectation from stakeholders (Kalu et al., 2016a) as
they are more visible than smaller ones (Andrikopoulos &
Kriklani, 2012). Further, firm size is one of the highly stud-
ied determinant of carbon disclosure in the empirical literature
(Chithambo & Tauringana, 2014; Freedman & Jaggi, 2005;
Halimah & Yanto, 2018). Past studies have unanimously
supported the argument of both theories and concluded positive
effect of company size on carbon disclosure (Borghei-Ghomi
& Leung, 2013; Chaklader & Gulati, 2015; Kumar & Firoz,
2019; Luo et al., 2012, 2013). Based on theoretical as well
as empirical support, we consider the following hypothesis.
Hypothesis 1. Firm size has significant positive effect on
voluntary carbon disclosure.
4.2. Accounting profitability
Socio-political theories purport that general public and in-
vestors expect higher disclosure from profitable firms as to know
the basis of company's profitability (Berthelot & Robert, 2012;
Chithambo, 2013). Therefore, in response to stakeholders' pres-
sure, profitable firms tend to disclose carbon emission data to gain
public trust as well as legitimatise the way of making profits
(Katarachia et al., 2018). Another strand of literature argues that
high profitability provides resources to the managers to absorb the
cost of disclosure (Brammer & Pavelin, 2006) and therefore
financially poor firms cannot afford the cost of disclosing the
environmental information such as carbon emission. Though
theoretical premises support direct relation between profitability
and carbon disclosure, empirical studies have provided mix results.
Past studies from Berthelot and Robert (2012) and Cahya (2016)
have indicated positive impact of profitability on carbon disclo-
sure whereas Andrikopoulos and Kriklani (2012); Yanto and
Muzzammil (2016) and Bae Choi et al. (2013); Kalu et al.
(2016a) have reported negative and no effect of profitability on
carbon disclosure, respectively. Therefore, this relationship re-
quires further probing and hence second hypothesis has been
framed as follows.
Hypothesis 2. Accounting profitability has significant effect
on carbon disclosure.
4.3. Debt financing
According to Jensen and Meckling (1976), high levered
firms are exposed to agency cost arising due to difference in the
objectives of managers and lenders. Further, as concluded by
Stanny and Ely (2008), highly geared corporations are subject
to extensive scrutiny by creditors and investors which forces
R. Desai
them to disclose voluntary information such as carbon emis-
sion. Further, according to the information asymmetry theory,
disclosure of information bridges the information gap between
creditors and managers which assists the capital suppliers for
taking decision (Lang and Lundholm, 2000). Therefore, firms
with higher debt level prefer to disclose more information to
reduce the agency cost vis-à-vis the cost of financing (Cormier
et al., 2005; Francis et al., 2006; Sharma, 2014). Several past
studies have empirically tested the effect of debt financing on
carbon disclosure (Akbas & Canikli, 2019; Borghei-Ghomi &
Leung, 2013; Prencipe, 2004; Xiao et al., 2004). They have
confirmed the tenets of agency theory and found positive
impact of leverage on environment disclosure. Based on the
theoretical and empirical premises, the third hypothesis has
been formulated as follows.
Hypothesis 3. Debt financing has significant positive effect on
carbon disclosure.
4.4. Market value
Shareholders of the company are exposed to higher risk and
uncertainty of returns as compared to the debt holders and
therefore, they exert higher pressure on firms to provide
additional information about the performance (Katarachia
et al., 2018). Further, as mentioned earlier disclosure of in-
formation diminishes the ‘information asymmetry’ among
managers and shareholders (Saka & Oshika, 2014) and will
also act as decision-making tool for the present and potential
investors. Based on Agency theory, managers strive to reduce
the perceived uncertainty of investors to minimise cost of
capital via carbon disclosures (Andrikopoulos & Kriklani,
2012; Drobetz et al., 2014) and therefore espouse voluntary
disclosure practices. However, referring to the empirical liter-
ature, limited studies have explored the link between carbon
disclosure and market value of firm. The available literature has
portrayed direct relation amid market value of shares and car-
bon disclosure (Saka & Oshika, 2014; Akbas & Canikli, 2019)
as the management of carbon emission and its disclosure has
been considered value relevant (Andrikopoulos & Kriklani,
2012). Following the past literature, the fourth hypothesis has
been constructed as follows.
Hypothesis 4. Market value of firm has significant positive
impact on carbon disclosure.
4.5. Industry affiliation
Besides accounting and market-based indicators, the in-
dustry affiliation also has considerable bearing on disclosure
practices. Environmentally sensitive firms (such as fossil fuels,
petroleum, coal) face greater risk relating to climate change due
to their large share in national carbon emission (Kumar &
Firoz, 2018). Because of their high propensity to pollute the
environment, environmentally sensitive firms are subject to
stringent regulatory norms and therefore they are desirous to
disclose carbon data as compared to non-sensitive firms (Peters
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& Romi, 2013; Cho and Patten, 2007). Further, though firms
are not bound to disclose carbon data in the emerging context,
sensitive industries are still continuously monitored by regu-
lators as they account for more than 40% of total carbon
emission of the country (CDP Report, 2019). Past empirical
studies have supported the positive effect of environmental
sensitivity on carbon disclosure (Busch and Hoffmann, 2011;
Qureshi et al., 2020; Kumar & Firoz, 2019) and based on the
same fifth hypothesis has been formulated as follows.
Hypothesis 5. Environmental sensitivity has significant posi-
tive effect on carbon disclosure.
4.6. Research gap
The review of extant literature highlights several gaps which
necessitates further research in this area. Firstly, as mentioned
earlier, majority of the past studies have focused upon devel-
oped economies and very limited evidence is available for
emerging countries. One of the reasons for such under-
exploration is unavailability of data (Ganda and Milondzo,
2018) due to lack of regulatory framework. Secondly, current
research belongs to the broad area of environmental disclosure
which is a multidimensional construct. Researchers have used
different indicators to measure environmental reporting such as
carbon disclosure on CDP (Giannarakis et al., 2017; Kumar &
Firoz, 2019), sustainability reporting through annual reports
(Chaklader & Gulati, 2015; Chithambo & Tauringana, 2014),
and developing a disclosure index using text analysis
(Andrikopoulos & Kriklani, 2012; Prado-Lorenzo et al., 2009).
Therefore, the outcomes of particular research are inconsistent
and sensitive to the variables used to quantify the environ-
mental disclosures (Margolis et al., 2008; Saka & Oshika,
2014). This requires further investigation as the existing evi-
dences are context specific and need to be validated before
generalising. Present study attempts to fill these gaps by
providing an inclusive evidence on the determinants of carbon
disclosure with reference to one of the fastest growing econ-
omies of the globe – India.
4.7. Conceptual model
The study proposes a theoretical model (refer Fig. 1) which
interlinks the hypothesised relationship between the dependent
and independent variables along with the disclosure theories
from which the particular variable emerges.
5. Research design
5.1. Measurement of variables
Present study uses carbon disclosure through CDP annual
report as dependent variable (Giannarakis et al., 2017; Kumar
& Firoz, 2019) to examine the effect of firms' characteristics
on disclosure. Carbon disclosure is operationalized as dichot-
omous variable which takes value as ‘one’ if the company has
disclosed CO2 emission data on CDP, otherwise ‘zero’. CDP is
R. Desai
Fig. 1. Conceptual model – determinants of emission revelation.
a not-for-profit institution which globally collects the data of
corporate carbon disclosure (CDP Report, 2012) and has been
considered as credible source of data in past studies (Desai
et al., 2021; Saka & Oshika, 2014). Further, use of third-
party disclosure approach such as CDP reporting enables to
reduce any firm-specific bias and improves the reliability of
disclosed information (Giannarakis et al., 2017).
Based on review of literature, the study includes five
explanatory variables that describe the firms' characteristics.
These variables are considered to represent financial report-
ing, market value, and industry affiliation of the firm. Natural
log of total assets has been used to present firm size (Halimah
& Yanto, 2018) and expected to have positive effect on
carbon disclosure (Li et al., 2014) as large firms attract the
attention from stakeholders and regulators (Desai et al.,
2021). Profitability as measured by RoA (Chaklader &
Gulati, 2015), has been considered as an important determi-
nant of carbon disclosure in past studies (Chithambo &
Tauringana, 2014) as profitable firms can invest in low-
polluting technologies and afford the cost of disclosure
(Chaklader & Gulati, 2015). Ratio of total debt to total asset
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has been proxied for leverage (Prado-Lorenzo et al., 2009)
and will have positive effect on carbon disclosure as high
levered firms experience pressure from lenders to become
more transparent (Wu et al., 2010). Apart from accounting
indicators, market value of firm, measured by the ratio of
market-to-book value of shares (Akbas & Canikli, 2019;
Andrikopoulos & Kriklani, 2012), has been included in the
regression model to examine the effect of capital market
participants on carbon disclosure. Lastly, industry affiliation
is expected to be positively related with carbon disclosure as
carbon-sensitive firms are more likely to disclose carbon data
compared to others due to high environmental risk (Kumar &
Firoz, 2018). Industry affiliation has been measured as cate-
gorical variable taking value as ‘one’ for firms that belong to
carbon-sensitive industry such as coal, fossil fuel, energy, and
materials, otherwise ‘zero’ (Matsumura et al., 2014).
Though extant literature reports certain qualitative factors
affecting carbon disclosure such as corporate governance and
environment certification, the scope of present study focuses on
the quantitative variables. The primary objective of the current
study is to examine the effect of financial, capital market, and
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Borsa Istanbul Review 22-5 (2022) 886–896

industry related determinants of carbon disclosure. Further, the Table 2

selected variables also represent certain qualitative aspects such Sample selection using multi-stage sampling method.
as efficiency (measured by operating profit), industry sensi- Particulars Number of firms Percentage
tivity, and market reputation (measured by market-to-book Number of initial sample companies 200 100%
value) (Table 1). Less: banking and financial service companies (43) 21.5%
Less: incomplete data (16) 8%
Final sample companies 141 70.5%
5.2. Sampling design and data collection

The study examines the carbon disclosure behaviour of In-

dian firms using the data of CDP annual reports. CDP invites
top 200 Indian companies to respond to their questionnaire
every year and disclose carbon emission data which are
considered for initial sample selection. The study adopts multi-
stage sampling method to construct a balanced panel data set.
Out of 200 firms, companies that are engaged in banking and
financial service sector following different regulatory frame-
work (Kumar & Firoz, 2018) as well as companies with
incomplete data are eliminate for further analysis. Hence, final
sample of 141 (refer Table 2) companies has been considered
for analysis.
Financial data has been extracted from the PROWESS-IQ
database of Centre for Monitoring Indian Economy (CMIE)
for the period of seven years (2014–2020). The sample period
has been taken considering the second commitment phase of
the Kyoto protocol (2013–2020) during which carbon reduction
and mitigation projects are prioritized through global emission
trading and clean development mechanism. This provided an
incentive for Indian companies to adopt low-polluting tech-
nologies and vis-à-vis implementing voluntary disclosure
practices. As a result, the number of Indian firms disclosing
carbon data on the CDP has increased by more than 60% after
implementation of the second phase of the Kyoto protocol
(CDP India Report, 2020). Hence, the sample period is chosen
with a view to analyse the adoption of voluntary disclosure
practices during the second phase of the Kyoto protocol.
5.3. Methods of data analysis
Descriptive (average, standard deviation) as well as
inferential statistics (correlation, multiple regression analysis)
are applied to analyse the collected data. Further, to test
multicollinearity, variance inflation factor (VIF) has been
used to check the presence of correlation between indepen-
dent variables. Considering carbon emission disclosure as
dependent variable and firm-specific characteristics as inde-
pendent variables, a regression model (refer to eq. (1)) has
been constructed. Besides, as the current data set contains
cross-sectional time series, year and firm-effects are also
examined.
CRDS
Ln( ) = β0 + β1 SIZEit + β2 ACPRit + β3 DBTit
1 − CRDS
141
+ β4 INDAFit + β5 MBVit + ∑i=1 Firm effect
7
+ ∑t=1 Year effect + εit (1)
The formulated regression model has been estimated using
binary logistic approach as the independent variable of the
model is categorical. As against other estimation method,
logistic regression does not assume linear relationship be-
tween dependent and independent variable (Midi et al., 2010)
and found to be the most suitable method of analysis
whenever the dependent variable is dichotomous (Akbas &
Canikli, 2019; Yang and Long, 2016). Further, the regres-
sion equation has also been estimated using GMM for
robustness and controlling the effect of potential endogeneity
(Mubeen et al., 2020).
6. Empirical results and discussion
6.1. Descriptive and correlation analysis
Summarised output of descriptive and correlation analysis
has been presented in Table 3. The average emission disclosure

Table 1
Operationalisation of variables.
Nature of variable Name of variable
Dependent Carbon disclosure (CRDS)
Independent Asset size (SIZE)
Accounting profitability (ACPR)
Debt financing (DBT)
Industry affiliation (INDAF)
Market value (MBVR)
Computation method Source
Categorical variable Kumar and Firoz (2019)
1 – disclosed carbon
data on CDP, 0 – otherwise
Log (total assets) Halimah and Yanto (2018)
Operarting profit Chaklader and Gulati (2015)
Total asset
Total Debt Halimah and Yanto (2018)
Total Asset
Categorical variable Kumar and Firoz (2018)
1 – sensitive industry,
0 – otherwise
Market price of shares Andrikopoulos and Kriklani (2012); Akbas and Canikli (2019)
Book value of shares

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Borsa Istanbul Review 22-5 (2022) 886–896

value (0.689) shows that many of the sample firms have dis- Table 4
closed the emission details on CDP. Mean value of ROA Result of binary logistic regression.
(8.30%) indicates moderate to low profitability of selected firms Variables Co-efficient Std. error p value
along with higher variations among them as indicated by stan- Constant −1.455 1.437 0.046
dard deviation value (0.074). Average MTB value (4.217) re- SIZE 1.751 0.341 0.000
flects favourable scenario for sample companies indicating high ACPR −4.373 2.406 0.023
DBT −3.587 1.321 0.000
market capitalisation. Further, the sample companies are INDAF 0.096 0.408 0.708
moderately levered as the leverage ratio is approximately 45%. MBV 0.543 1.235 0.004
On the basis of descriptive analysis, it can be concluded that Firm effect Yes
selected companies are less profitable, medium size and Year effect Yes
moderately levered. Further, correlation matrix is also included Omnibus test/LR statistic (sign. value) 45.217 (0.00)
Hosmer and Lemeshow Test (sign. value) 14.918 (0.064)
in Table 3. Except industry, all variables are found to be Pseudo R2 0.231
significantly correlated with disclosure. Firm size has significant PAC 74.20%
positive relation whereas profitability and leverage are nega- Source: Compiled from SPSS output.
tively related with emission disclosure. Besides, VIF has been
computed for studying multicollinearity. The maximum value of
VIF is 3.425 which is below the threshold value of 10 (Gujarati, media, and general public which forces them to reveal addi-
2003). Therefore, it can be concluded that the multicollinearity tional information supplement to mandatory disclosures
among dependent variables in within allowable limits. (Prado-Lorenzo et al., 2009). Further, large firms have enough
resources permitting the managers to afford voluntary disclo-
6.2. Result of binary logistic regression sures compared to smaller companies (Chithambo, 2013).
Next, market-to-book value ratio has significant positive
The output of logistic regression model is reported in Table impact on carbon disclosure that confirms the outcome of in-
4. To test model fit, Omnibus test as well as Hosmer and formation asymmetry theory (Hermawan et al., 2018; Saha
Lemeshow test has been performed and both have prescribed et al., 2021). Voluntary carbon disclosure can reduce the pro-
identical conclusion regarding the statistical significance fessed risk in predicting the future performance of the firm vis-
(χ2 = 45.217, p < 0.01) of the model. Further, the pseudo R2 à-vis the market value of shares (Andrikopoulos and Kriklani,
value is 0.231 demonstrating that the selected variables can 2012) and therefore, induces firms to disclose carbon data.
elucidate 23% changes in the probability of the firm to disclose Alternatively, investors consider carbon disclosure as value
the carbon emission on the CDP. Percentage accuracy in relevant even in emerging countries (Akbas and Canikli, 2019)
classification (PAC) is 74.20% which describes the success which motivates organizations to opt for disclosure of carbon
rate of in predicting the probability of firms' disclosure. Re- data even though it is not mandatory.
sults indicate that all selected determinants have significant In contrast with the legitimacy theory and past studies from
effect on carbon disclosure except for industry affiliation. Past developed countries by Gul and Leung (2004), Berthelot and
studies of Chaklader and Gulati (2015) and Akbas and Canikli Robert (2012), and Akhiroh and Kiswanto (2016), present
(2019) have also suggested industry affiliation as a weak research concludes negative impact of profitability on firm's
predictor of carbon disclosure. This can be explained as, in propensity to disclose carbon data on CDP. This can be
emerging context, voluntary disclosure practices apply equally explained as profitable companies do not wish to inflate carbon
to all firms irrespective of the industry and therefore the de- disclosures as it may suppress the financial achievements
cision of carbon disclosure is independent of type of sector. (Irwhantoko & Basuki, 2016) and divert the attention of stake-
Consistent with the findings of Rankin et al. (2011), holders. Further, profitable firms may not divert their resources
Berthelot and Robert (2012), and Datt et al. (2018), results towards voluntary disclosure as its outcomes are uncertain in
indicate significant positive effect of firm size on carbon emerging context (Halimah & Yanto, 2018). On the other hand,
disclosure which is congruent with legitimacy theory (Kalu current results can be validated as less profitable firms use
et al., 2016a). Large companies are more noticeable and are disclosure as a medium to legitimise the business operations
continuously being scrutinised by investors, government, (Yanto & Muzzammil, 2016) and make them attractive among

Table 3
Output of descriptive and correlation analysis.
Variables Avg. (SD) Maxi. (mini.) CRDS SIZE ACPR DBT INDAF MBV
CRDS 0.689 (0.464) 1.000 (0.000) –
SIZE 4.341 (0.495) 5.538 (3.456) 0.265** –
ACPR 0.083 (0.074) 0.319 (−0.161) −0.602** 0.033 –
DBT 0.449 (0.171) 0.822 (0.091) −0.207** 0.140* −0.040 –
INDAF 1.436 (0.497) 1.000 (0.000) 0.015 −0.251 0.282* −0.301* –
MBV 4.217 (3.553) 18.340 (0.340) 0.517** 0.107 0.236* −0.225 0.107 –
Source: Compiled from SPSS output.

892
R. Desai _
Borsa Istanbul Review 22-5 (2022) 886–896

other stakeholders (Prado-Lorenzo et al., 2009). Finally, size and market value has positive impact on disclosure indi-
consistent with signalling theory, debt financing has negative cating that large size and high value firms have high probability
and significant effect on carbon disclosure which has been to disclose emission information as compared to others. On the
confirmed by past studies (Brammer & Pavelin, 2006; contrary, negative impact of profitability and leverage implies
Chaklader & Gulati, 2015). This result can be explained as low- that highly profitable and geared companies tend to disclose
levered firms using disclosure as a signal of better environmental less information about the carbon emission. Finally, industry
performance attempt to raise funds at economic rates affiliation is found to be an insignificant determinant of carbon
(Chithambo & Tauringana, 2014). Further, as carbon disclosure disclosure. Present study provides important implications for
is not mandatory in India, financial institutions do not insist researchers and academicians. Firstly, considering the Indian
upon such disclosures and therefore, firms may not disclose any context, it contributes towards the growing research of envi-
additional carbon data due to the perceived negativity associated ronmental and sustainability disclosures from an emerging
with poor environmental performance. nation viewpoint where the concept is underexplored. Sec-
ondly, current research provides integrated analysis of finan-
6.3. Result of GMM regression – robustness analysis for cial, industrial and market-value based determinants of carbon
endogeneity disclosure of firms as against past studies which have focused
only on one of the given factors (Chaklader & Gulati, 2015;
Corporate finance research generally exposed to problem of Halimah & Yanto, 2018; Prado-Lorenzo et al., 2009). Thirdly,
endogeneity arising from omitted variables and reverse cau- the results are robust and free from multicollinearity and po-
sality (Roberts & Whited, 2013) as dependent variable can tential endogeneity issues which will further enhance the
affect the independent variable as well. In other words, applicability of the implications derived from the same.
disclosure of carbon emission data reduces information asym- Based on empirical results, the current research also depicts
metry and thereby affects the market price of the share vis-a-vis several implications for managers and regulators. First, the
the MBV ratio. To correct the problem of potential endoge- average carbon disclosure score depicts that Indian firms, due
neity, the regression model has been re-estimated using GMM to its voluntary nature, have not completely implemented the
approach (Ashrafi, 2019; Pucheta-Martínez & Chiva-Ortells, notion of carbon disclosure and those who have implemented
2020) and the results are summarised in Table 5. Besides are not consistently following it. This creates a need of a reg-
regression coefficients of the model, Wald – χ2 – for model ulatory framework that provides incentive to accept the same
significance, Sargan test of overidentifying restrictions, and the and make companies to reveal carbon data in the interest of all
Arellano–Bond test for serial correlation have been performed stakeholders. Second, the results indicate significant effect of
and the results are within the acceptable range indicating the firm characteristics on carbon disclosure hence the provisions
robustness of results. Further, as the regression co-efficient of of disclosure regulation should be dynamic instead of generic
both methods are congruent, the conclusion and implications i.e., regulators may start with the small size, high-levered, and
are drafted based on logistic regression. profitable firms which are less likely to adopt canons of carbon
disclosure. Third, as market value has significant effect, man-
7. Summary, conclusion and implications agers of high value firms should integrate carbon disclosure
along with other information to reinforce and strengthen the
Provided the limited exploration of carbon disclosure relation with investors and stakeholders.
research in the context of emerging economies, current Though current study attempts to provide a cohesive anal-
research studies the firm-specific factors affecting the voluntary ysis of carbon disclosure, few limitations are encountered.
disclosure of corporate carbon emission on the CDP. Analysing First, due to variations in the environmental regulations of
the sample data of 141 firms for a period of seven years different countries, present findings may be altered before
(2014–2020) using logistic regression, the study concludes that applying to other nations. This creates a scope for future re-
searchers to conduct a cross country study and compare the
Table 5
results. Second, as voluntary carbon disclosure also depends
Result of GMM regression. upon the discretion of top management, present research can be
Variables Co-efficient Std. error p value
extended by involving corporate governance variables such as
board size, CEO duality, and independent directors. Third, the
Constant −1.389 1.413 0.032
SIZE 1.682 0.386 0.003
current study period is based on the second phase of the Kyoto
ACPR −3.931 2.576 0.036 protocol however, a comparative study can be conducted
DBT −3.596 1.359 0.000 considering the first phase (2008–2012) as well to analyse the
INDAF 0.089 0.424 0.238 trends and development in the carbon disclosure practices.
MBV 0.572 1.295 0.009
Year effect Yes
Wald – χ2 203.753 (0.0013)
Funding sources
Sargan test (sign-value) 0.2964
AR (1) (sign-value) 0.0465 This research did not receive any specific grant from
AR (2) (sign-value) 0.1983 funding agencies in the public, commercial, or not-for-profit
Source: Compiled from EViews output. sectors.
893
R. Desai
Declaration of competing interest
Author certifies that there is no conflict of interest.
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