Abstract

This paper analyzes the value relevance of firms’ social and environmental disclosure (SED) patterns expected by investors considering firms’ institutional contexts. Results show that the expected SED is value relevant for Chinese firms, not value relevant for Mexican and Canadian firms, and partial value relevant for Chilean, South African, and American firms. For Chinese firms, when the expected SED is isomorphic within the country, it is positively related to market value. However, the alternative expected SED is negatively related to market value. For Chilean firms, only the isomorphic social disclosure is (positively) valued by the stock market. Whereas for South African and American firms, only the alternative social disclosure is positively related to market value. Results suggest that institutions are essential to SED valuation as they determine whether and how stock markets value SED. Researchers in the discipline of accounting has taken an interest in social and environmental activities along with the rise of environmental protection regulations.

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