The impact of voluntary environmental disclosure on firm value: Does organizational visibility play a mediation role?

The current study investigates whether organizational visibility, that is the extent to which analysts follow, and institutions hold, a firm's stock (Baker, Powell, & Weaver, , p. 47), may explain the mechanism through which corporate environmental disclosure (CED) affects firm value. It explores whether CED impacts organizational visibility, and if so, whether firm value increases in organizational visibility, after accounting for greenhouse gas emissions intensity (GHG) as well as several firm-level and country-level controls. It utilizes a sample of S&P Global 1200 companies from 2010 to 2015. Using structural equation modeling to address the complex interrelationships between the variables of interest and employing Full Information Maximum Likelihood regression method, the findings show that organizational visibility does not play a statistically significant mediation role on the relationship between CED and firm value. However, organizational visibility is significantly associated with both CED and firm value, which indicates that failing to control for organizational visibility when examining the relationship between CED and firm value could yield misleading results. The results also show that prior CED significantly reduces current GHG. Interestingly, analyst coverage is found to play a full mediation role on the relationship between institutional ownership and firm value as well as a partial mediation role on the relationship between prior GHG and firm value. Thus, this study suggests that corporate management lobby financial analysts and educate them about their firms' environmental disclosure and performance to improve their information set and increase firm visibility and value.