The Effects of the Institutional Environment on Environmental Disclosure: evidence from Emerging Economies

Abstract

This study investigates the institutional determinants of corporate environmental disclosure (EDI) in emerging countries. Specifically, it examines the role of institutional enforcement, the quality of the institutional environment, and sectoral imitative behavior in explaining firms’ environmental disclosure levels. The sample comprises publicly traded companies from 2014 to 2024. Methodologically, quantile regression is employed to capture heterogeneity across the conditional distribution of the dependent variable, complemented by OLS estimates for robustness purposes. The results indicate that institutional enforcement does not present a consistent effect on environmental disclosure, providing no robust support for the corresponding hypothesis. In contrast, the quality of the institutional environment exhibits a non-linear effect, suggesting an interdependent relationship with governance mechanisms, consistent with institutional substitution arguments. Additionally, the sectoral effect is positive and statistically significant, indicating that firms tend to align their disclosure practices with prevailing sector standards, supporting the presence of mimetic isomorphism. The findings show that different institutional mechanisms influence corporate behavior in distinct ways, depending on firms’ transparency levels. From a practical standpoint, the results highlight the importance of public policies and sectoral initiatives aimed at enhancing environmental transparency, particularly in heterogeneous institutional contexts.