DETERMINANTS OF ENVIRONMENTAL DISCLOSURE IN ANNUAL REPORTS OF SRI LANKAN LISTED MANUFACTURING COMPANIES

The aim of this study is to investigate the level of corporate environmental information disclosure practices of listed manufacturing companies in Sri Lanka. The study also examined the influence of firm size, profitability and listing age on the level of corporate environmental information disclosure. To achieve the aims of this study, content analysis and statistical analysis were used. Content analysis by word count is used to determine the level of social and environmental disclosures on annual reports of Sri Lankan listed manufacturing companies. To determine the factors that explain the level of social and environmental information disclosures, descriptive statistics, correlation analysis and multiple regressions analysis were used. The finding indicates that 50.63% of the companies provided corporate environmental information in their 2012/2013 annual reports. Multiple regression analysis revealed that size of the firm had significant positive relationship with the level of corporate environmental information disclosure. However, corporate environmental disclosure has not been influenced by the profitability and listing age.


Introduction
In recent years environmental disclosure has become more important things in both developing and developed countries.
Stakeholders' demand for environmental information and the reporting of firm impact on the physical environment have dramatically increased during the last few years. However, the existing environmental reporting even in developed countries is deficient and not of a standard to satisfy the information requirements of various groups of stakeholders. This is mainly due to an inadequate supply of environmental information as there are impediments to encourage environmental reporting at firm as well as at national level.
Corporate environmental disclosure is a part of social reporting and the environmental disclosures are mainly non-financial in nature. Management -Vol. 12 No.1 April 2015 information and the reporting of firm impact on the physical environment have dramatically increased during the last few. Corporate environmental disclosure is increasingly an important issue to corporate investors, public policy makers and the general public. These disclosures are important, because they provide environmental performance information and influence capital markets (Villiers and Staden, 2011). Therefore, corporate investors and other stakeholders need to use environmental information in their decisionmaking. There is extensive evidence that social and environmental information is useful for decision-making by investors and other stakeholders (Blacconiere and Patten, 1994 and Richardson and Welker, 2001 (Hogner, 1982;Lindblom, 1983;Patten, 1991Patten, , 1992Patten, , 2002. This theory revolves around the concept of a social contact. The social contract is an implicit contract with society agreeing "to perform socially desirable actions in return for society's approval of its objectives and its ultimate survival" (Guthrie and Parker, 1989).

Journal of
Therefore, social disclosure can be viewed as a constructed image or symbolic impression of itself that a firm is conveying to the outside world to control its political or economic position (Neu et al., 1998).  Patten, 1991;Deegan and Rankin, 1996;Woodward et al., 2001).

Size of the Firm
An association between company size and social responsibility was first investigated by Eilbert and Parket (1973). They concluded that large firms feel themselves to be the target of social activists or regulators and thus consider it necessary to make a visible effort to establish their social responsibility credentials to keep their dominance. The legitimacy theory provides a basis for a relationship between level of corporate social disclosures (CSD) and firm size (Hackston and Milne, 1996). Under legitimacy theory, firms' societal existence depends on the acceptance of the society where they operate. Since the firms can be influenced by, and have influences to the society, legitimacy is assumed an important resource determining their survival (Deegan, 2002). It is argued by Guthrie and Parker (1989) and Cowen et al. (1987)  Based on the above discussion and following the legitimacy theory, it's expected that large firms will disclose more social and environmental information than smaller firms. Therefore, the following hypothesis is tested.  (Kuasirikun et al, 2004, Tilt, 1994. Annual reports are useful to various stakeholders in obtaining information about company performance (Deegan and Rankin, 1997), are published regularly (Neimark, 1992) and provide considerable information on social disclosures (Gray et., al, 1995a (Gray et.al., 1995b).

ariables and Measures
The dependent variable in the model is the level of environmental information disclosure on annual report of Sri Lankan listed manufacturing companies. The level of is measured by word count using a checklist divided into 22 different items adopted from previous studies by Wiseman (1992) and Singh & Ahuja (1983) Deegan and Gordon, (1996). The present study has taken 18 items from these 22 items. The checklist as follows: 1. Past and current expenditure for pollution control equipment and facilities.
2. Future estimates of expenditures for pollution control equipment and facilities.
3. Financing for pollution control equipment or facilities.
7. Compliance status of facilities.
8. Environmental policies or company concern for the environment.

9.
Recycling plant of waste products.
10. Installation of effluent treatment plant.
11. Installation of effluent treatment plant.
14. Pollution control of industrial process.

15.
Research on new methods of production to reduce environmental pollution.
18. Support for public or private action designed to protect the environment.
The three independent variables, firm size, profitability and firm's listing age, are the used to achieve the objectives of this study. The variables used in this study were measured on the basis of following: 1) Firm size was measured as the companies' 2012/2013 total of assets.
2) Profitability was measured as the net profit

Model Development
To determine the influence of the three firm characteristics on the level of environmental disclosure the following multiple regression model is developed and fitted to the data.            et al., 2006;Ho and Taylor, 2007;Stanny and Ely, 2008;Alarussi et al., 2009;Prado-Lorenzo et.al., 2009a;Prado-Lorenzo et.al., 2009b Suttipun andStandton, 2011;Setyorini and Ishak, 2012;Akrout and Othman, 2013)