A Study of Incentives and Benefits of Voluntary Disclosure in the Extractive Industry by Companies Listed on the London Stock Exchange

Abstract

Over the past few decades, the information contents of many annual reports of companies have increased with voluntary disclosure taking a sizeable portion. The preparation and dissemination of information has huge costs to the companies. We therefore studied incentives and benefits for such voluntary disclosures with reference to companies in the extractive industry listed on the London Stock Exchange. The extractive industry involves all industries that engage in finding, acquiring and trading of natural resources either in its raw or processed forms. The activities of these companies directly affect communities, governments and the environment, hence the voluntary disclosure is dominated by environmental issues. We investigated whether cost minimisation, competitive advantage, avoidance of litigation and reputation costs, pressure from institutional stakeholders, stakeholder understanding and social responsibility are incentives and benefits for voluntary disclosure in the extractive industry. Legitimacy theory and the content analysis model were used for the analysis. The study generally found out that the companies disclose voluntary information to stakeholders because of the investigated incentives and benefits but adopt an alternative disclosure strategy which portrays all the incentives and benefits for voluntary disclosure to stakeholders as either social responsibility or stakeholder understanding.