www.sciedu.ca/afr Accounting and Finance Research Vol. 2, No. 1; 2013 Published by Sciedu Press 110 ISSN 1927-5986 E-ISSN 1927-5994 An Empirical Analysis of the Determinants of Greenhouse Gas Voluntary Disclosure in Australia Zahra Borghei Ghomi & Philomena Leung (Corresponding author) Department of Accounting and Corporate Governance, Macquarie University, Sydney, Australia Tel: 61-2-9850-4413 E-mail: philomena.leung@mq.edu.au Received: January 12, 2013 Accepted: February 14, 2013 Online Published: February 20, 2013 doi:10.5430/afr.v2n1p110 URL: http://dx.doi.org/10.5430/afr.v2n1p110 Abstract Based on a comprehensive theoretical framework, we investigate the determinants of greenhouse gas emission (GHG) voluntary disclosure of non GHG registered companies. Previous studies assessed the determinants of GHG voluntary disclosure of firms subject to environmental regulation, risk and liabilities. We also employ proxies of voluntary disclosure theory and agency theory in addition to the stakeholder theory and legitimacy theory used in prior studies. The content analysis for the period 2009 to 2011 shows a positive association between GHG voluntary disclosure, firm size and corporate governance. Further, firms with superior GHG performance are more likely to engage in discretionary disclosure, and listing status plays a significant role in GHG disclosure decision which suggests that stakeholders’ interests also determine disclosure decisions. Keywords: GHG emission, Voluntary, Disclosure, Content analysis, Determinant 1. Introduction Climate change issues and public concerns over problems caused by climate change have led to the emergence of new environmental regulations in recent years. These changes focus on the reduction of GHG worldwide by adopting strategies such as carbon pricing. One example of a regulatory disclosure requirement is the Australian National Greenhouse and Energy Reporting (NGER) Act 2007. This act mandates companies with GHG, energy consumption, or production above the specified thresholds (Note1) to report their GHG, measured in CO2-e (carbon dioxide equivalents), as well as energy consumption and production data to the Australian Government (Note 2) (Australian Government Department of Climate Change and Energy Efficiency, 2010). However there are some corporations which do not meet mandatory reporting criteria but disclose GHG information voluntarily. One hundred and seventy-four (174) Australian Stock Exchange (ASX) listed companies out of 2317 firms in 2012 disclose different levels of GHG information while they are not subject to the NGER Act 2007. For instance, Ausenco publicly discloses its GHG information, despite the fact that its level of total carbon dioxide equivalents is only about 16½ kilo tons, below reporting criteria. The existing literature in voluntary disclosure research area can be categorized into three groups: financial voluntary disclosure, social voluntary disclosure, and GHG voluntary disclosure. As the financial disclosure literature was gaining momentum, social disclosure studies gradually started to develop. The growing literature of social voluntary disclosure examines several determinants of disclosure. They encompass determinants identified in the financial disclosure literature, and a number of determinants linked to social responsibility concepts (e.g., Clarkson, Li, Richardson, and Vasvari (2008); O’Donovan (2002); Patten (1992)). Then when climate change became a point of concern for society, a relatively new concept formed in voluntary disclosure literature regarding GHG voluntary disclosure. Although several previous studies (e.g., Luo et al. (2010); Prado-Lorenzo, Rodríguez-Domínguez, Gallego-Álvarez, and García-Sánchez (2009); Stanny and Ely (2008)) look at the determinants of voluntary disclosure in GHG setting, generalizing the findings of these studies leads to a sample bias problem. The findings of these studies show that firm size is a dominant factor for GHG voluntary disclosure. However these samples are chosen from the largest companies in the world such as companies in Fortune 500 US, S&P500 and Global 500 (Berk, 1983). Further, these large companies are mostly subject to the mandatory GHG reporting and the reason behind their disclosure is more likely to be regulation rather than discretion. Several researchers, such as, Luo et al. (2010) choose the sample from firms which responded to the CDP questionnaire. They claim that respondents’ behaviour is discretionary, as sample