THE IMPACT OF VOLUNTARY ENVIRONMENTAL DISCLOSURE QUALITY ON FIRM VALUE.

Abstract

The article analyzes the association of firm value, in terms of the cost of equity capital (CostCap) and the anticipated cash flows, with its voluntary disclosure quality. The authors explain the design of their measure of voluntary environmental disclosure (VED), which is based on the organization's annual report, 10-K filings, or Corporate Environmental Report (CER), and how the firm-specific VED scores are calculated from the disclosure index. The article suggests that firm value is positively related to VED quality and the use of the CER in the analysis. Mathematical formulas for CostCap are discussed.