International Journal Of Social Economics

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Posted on Mar 20, 2016

International Journal Of Social Economics

The research model on page 945 includes three explanatory variables. Using these variables & the discussion throughout the articles,explain low levels of sustainability disclosures by firms based in Fiji & other countries in the USP region: and Contrast the disclosure by firms in (a) above with disclosures bu commercial banks domiciled in Australia.
International Journal Of Social EconomicsThere are several factors affecting low levels of sustainability disclosures by firms based in Fiji & other countries in the USP region. These factors include legal factors, industrial related matters & stakeholder credentials which prevent management from disclosure pertaining to sustainability (non-financial) matters. The demand for creation of shareholder wealth from investment fraternity puts enormous pressure on the management to post strong topline & bottom-line growth which gets reflected in enhanced market capitalization on the stock exchanges (Carol-Ann Tetrauit Sirsly, Sujit Sur, 2013). Legal factors refer to legal conditions prevailing in the country in which the company is operating. These factors include enforcement, police, litigation or legal proceedings in court of law. Firms in the USP region operate in a strong legal environment & have higher country level protection mechanism. Thus, the need for disclosure on sustainability matters involving legal issues is taken care at the macro level instead of micro level involving firms. Stronger legal environments on country level ensure adequate protection for the firms & the need for assurance is lower at firm level which gets translated in low level of sustainability disclosures. Assurance purchase to enhance user confidence for companies operating in strong legal environment tends be on the lower side as the cost involved for such assurance purchase outweighs the benefits (Lily M. Hoffman 2014).

Industry related matters have a bearing on the operations of firms & company’s policies are framed in accordance with industry rules & regulations. Firms based in Fiji & other countries in the USP region have limited exposure to mining, production, utilities & financial sectors which are highly susceptible to environment & social risk. The percentage of firms having environmental & social risk is on the lower side & shareholder interest takes high priority in comparison to stakeholder interest. Firms based in the USP region are domiciled in common law rather than code law. These firms have corporate governance model which emphasizes on shareholders interest rather than stakeholder interest (Richard Fellows, 2006). Shareholder wealth creation is of paramount importance & management gives stress on financial numbers & financial reporting in contrast to sustainability reports. The low demand for non-financial information among shareholder is another factor affecting such lower levels of sustainability disclosures.

Commercial banks situated in Australia have higher social implications because of their financial reach. Financial firms affect livelihood of people residing in the country & plays a vital role in GDP growth of the country. Major chunk of population is engaged in financial sector services which also determine the pattern of distribution of national income. The demand for non-financial information from stakeholder fraternity is higher because of the social influence & material impact on the larger section of the society. Stakeholders have a keen watch on the activities of banks as it the public money floating around in the system & any financial turmoil could derail the financial system & economy at macro level. These banks are governed by more of stakeholder interest rather than shareholder interest (Ravi Fernando, 2012).

  1. Sustainability disclosures can be assured by large accounting firms or non-accounting professionals e.g. environmentalists.
  1. Discuss the benefits and limitations of each approach: and
  2. Explain which approach in (a) above would you support.

Financial reports disclose information pertaining to financial performance & serves as a useful tool for evaluation of performance of a company on the basis of historical reported financial results. Financial reports are easily available & assessment of a company financial health can be done basis key available operating performance metrics. Financial reporting do not cover non-financial factors affecting the company in particular & macro factors such as industrial dimensions & country specific factors affecting organization on a larger scale. Financial results also lag behind in providing an insight as to legal, environmental & social aspects within which a company operates. The need for disclosure of more non-financial information for investment decision has resulted in demand for sustainability reports. However, a relatively smaller percentage of companies issue sustainability reports (Sabine U. O’Hara 1998). The key reason being that there are several non-financial factors which may have a detrimental impact on the performance of a company. Ignorance of sustainability matters may lead to non-informed decision making process taking place. Sustainability reports may be assured & assurance purchase may or may not be from auditing profession. Issuance of sustainability reports from companies are viewed positively by investors as it is a voluntary disclosure of non-financial information affecting company & they enhance goodwill of management & company in particular (Fumiyo Kagawa, 2007).

Companies with a focus on enhanced user credibility get their sustainability reports assured by large accounting firms. The reason being these large accounting firms have economies of scale & bring goodwill along with them. They also have well established global standards, codes & regulations which help in assurance of sustainability reports on a global level. These firms can engage specialist provider like environmentalist for availing their expertise on the subject matter because of their sheer size. Auditing firms charge higher fees in comparison to non-auditing firms but the costs incurred by the company in the form of audit fees is far lower than the cots which a company may incur on legal proceedings (Felipe Meyer Cohen, David Tappin 2014),. On the other hand, specialist providers charge lower fees in return of their expertise but the credibility of sustainability reports issued by them fails to have a meaningful impact on the investment decision.

Firms based in Fiji & other countries in the USP region have low levels of sustainability disclosures. These firms are more focused on shareholder interest as the key objective is shareholder wealth creation. Thus, such companies would prefer non-auditing firms for sustainability reports as management may try to hide non-financial information which may have a detrimental impact on the stock price. On the other hand, commercial banks situated in Australia would prefer to choose members from auditing profession because of larger stakeholder interest rather than shareholder interest. Banks serves as the lifeline of the financial system & their transparency & integrity is of utmost importance & any information be it financial or non-financial cannot be overlooked (Ronald P. Guidry, Dennis M. Patten, 2010)

Word Count: 993 words 


Carol-Ann Tetrauit Sirsly, Sujit Sur, (2013), “Strategies for sustainability initiatives: why ownership matters”, Corporate Governance, Vol. 13 Iss: 5, pp.541 – 550

Lily M. Hoffman (2014), From Sustainability to Resilience: Why Locality Matters, in William G. Holt (ed.) From Sustainable to Resilient Cities: Global Concerns and Urban Efforts (Research in Urban Sociology, Volume 14) Emerald Group Publishing Limited, pp.341 – 357

Richard Fellows, (2006) “Sustainability: a matter of energy?”, Property Management, Vol. 24 Iss: 2, pp.116 – 131

Fumiyo Kagawa, (2007) “Dissonance in students’ perceptions of sustainable development and sustainability: Implications for curriculum change”, International Journal of Sustainability in Higher Education, Vol. 8 Iss: 3, pp.317 – 338

Ravi Fernando, (2012) “Sustainable globalization and implications for strategic corporate and national sustainability”, Corporate Governance: The international journal of business in society, Vol. 12 Iss: 4, pp.579 – 589

Sabine U. O’Hara (1998) “Internalizing economics: sustainability between matter and meaning”, International Journal of Social Economics, Vol. 25 Iss: 2/3/4, pp.175 – 195

Felipe Meyer Cohen, David Tappin (2014), Social Sustainability in the Chilean Logging Sector, in Gabriel Eweje (ed.) Corporate Social Responsibility and Sustainability: Emerging Trends in Developing Economies (Critical Studies on Corporate Responsibility, Governance and Sustainability, Volume 8) Emerald Group Publishing Limited, pp.269 – 294

Ronald P. Guidry, Dennis M. Patten, (2010) “Market reactions to the first‐time issuance of corporate sustainability reports: Evidence that quality matters”, Sustainability Accounting, Management and Policy Journal, Vol. 1 Iss: 1, pp.33 – 50

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