The Implications of Ownership Structure on the Environmental Disclosure in Jordan

This paper investigated the effect of a set of factors related to the ownership structure at the level of environmental disclosure in Jordan during the period 2012 – 2107. The study examined the factor of foreign ownership, government ownership, managerial ownership and block-holder ownership, as well as a study sample consisting of 51 Jordanian industrial companies listed On the Amman Stock Exchange. The study used content analysis to obtain 306 notes during the study period, and appropriate statistical tests were applied to obtain the results. The results indicate a significant impact of foreign ownership on the level of environmental disclosure. While the results did not provide sufficient evidence for the presence of impact Government ownership, managerial ownership and block-holder ownership on the corporate environmental disclosure level, the results of the study are important for stakeholders, policymakers and regulators, by identifying how companies deal with the issue of environmental disclosure and focusing on supporting the factors that represent strengths in influencing disclosure. Introduction The world has recently witnessed great interest in the activities of companies and their potential effects on the environment and society, and this interest is highlighted more specifically by stakeholders. Companies' disclosure about their operations and activities in a transparent and real way can enhance their social and environmental responsibility in the society in which they operate (Benlemlih International Journal of Academic Research in Business and Social Sciences Vol. 1 0 , No. 3, March, 2020, E-ISSN: 2222-6990 © 2020 HRMARS 332 et al. 2018). As companies have become more accountable to society and the stakeholder’s public, and their activities are subject to their monitor them and their pressures constantly. In developing countries, there is a clear weakness in dealing with the corporate environmental responsibility agenda, which may be one of the reasons behind this weak economic and trade structure in these countries (Fallah & Mojarrad, 2019). Jordan is not a special case for developing countries, where it suffers from many economic, social and environmental crises that weaken the sustainable development movement in it. As the government is working hard to promote sustainability in Jordan, it announced a plan that includes social, environmental and economic goals called "Jordan 2025" in order to promote sustainable development in the country. Environmental disclosures do not fall within the requirements of generally accepted accounting principles (GAAP) or international accounting standards. Moreover, the disclosure requirements in Jordan also do not compel companies to disclose their environmental performance. For this reason, environmental disclosures are considered as optional information. Which means that companies can disclose the extent of their contribution in this field or not. The current study aims to determine the impact of a set of factors related to the ownership structure of companies, as it examines the impact of Foreign Ownership, Government Ownership, Managerial Ownership and Block-Holder Ownership on the level of environmental disclosure of Jordanian industrial companies listed. Literature Review Several previous studies have examined the issue of the ownership structure and its impact on the disclosure of information. (e.g. Saini & Singhania, 2019; Abu Qa’dan & Suwaidan, 2019; Bani-Khalid et al. 2017; Elfeky, 2017; Alhazmi, 2017; Haddad, AlShattarat, AbuGhazaleh, & Nobanee, 2015; Albawwat & Basah, 2015; Alhazaimeh et al. 2014; Sufian & Zahan, 2013; Juhmani,2013; Rouf, 2011 and Barako et al. 2006). In the context of the studies that provided positive evidence on the relationship between the ownership structure factors and disclosure, Barako et al. (2006) tested a number of factors to measure the extent of their impact on voluntary disclosure in Kenya. His study included 54 companies and his results concluded that foreign ownership has a strong influence on the level of voluntary disclosure in Jordan. Albawwat & Basah (2015) conducted a study of the factors affecting voluntary disclosure. The study sample consisted of 72 listed companies and the results showed that government ownership plays a critical role in voluntary disclosure. Also, Alhazmi (2017) supported the idea of government ownership impact on the disclosure of social responsibility through a study conducted in Saudi Arabia. In addition, Alhazaimeh et al. (2014) conducted a study on 72 listed Jordanian companies, on the effect of a number of factors on the level of voluntary disclosure. The results showed that the foreign ownership and the block-holder ownership have a significant impact on the information disclosure level that companies disclose voluntarily. Haddad et al. (2015) also added that Government ownership positively affects voluntary disclosure in a study conducted in the Jordanian context. Sufian & Zahan (2013) argued that administrative ownership has a crucial role in disclosing International Journal of Academic Research in Business and Social Sciences Vol. 1 0 , No. 3, March, 2020, E-ISSN: 2222-6990 © 2020 HRMARS 333 information to companies and supporting their opinion. Rabiu & Ibrahim (2017), provided evidences from Nigeria on this. On the other hand, others argued about the relationship between the ownership structure and disclosure. Where Abu Qa’dan & Suwaidan (2019) claimed that the relationship between foreign ownership and disclosure is a negative relationship in a study he conducted in Jordan. Saini & Singhania (2019) support these evidences, as they tested the impact of foreign ownership on environmental and social disclosure in India. Where a sample of 648 listed Indian companies were chosen and the results showed that there is a negative impact of the foreign ownership factor at the level of disclosure. Several other studies have provided evidence that the ownership structure has a negative impact on disclosure (e.g. Rouf, 2011; Juhmani,2013; Bani-Khalid et al. 2017; Elfeky, 2017) Theoretical Framework This study is based on a multiple theoretical framework, where it uses the stakeholders and legitimacy theories, which are usually presented as the explanations of companies ’motives in disclosure. Stakeholder theory was discussed in the literature on accounting disclosure and its types, such as social, environmental and voluntary disclosure, as one of the underlying drivers behind the phenomenon of disclosure. According to Freeman (2010), stakeholder theory pushes for ethical approaches to corporate governance in turbulent and highly complex environments. Also, the stakeholder’s theory is considered an integrated theory, as it calls for the consideration of all stakeholders demands without exception or discrimination (Harrison et al. 2015). Stakeholders 'demands are the basis for the method of dealing with companies. Where the Sharpness in dealing with corporate management is usually linked to the implementation of the stakeholders' demands, wherever the company’s response to the aspirations of the stakeholders is satisfactory, the Sharpness of dealing and pressures by the stakeholders decrease, and so on. Whereas, the strength of stakeholders plays a critical role in quickly responding to their demands (Deegan, 2013). There is doubts from stakeholders about the environmental performance of companies due to inconsistencies in the information provided by companies (Li et al. 2018). However, companies’ adoption of environmental issues can give them a better reputation among stakeholders (Benlemlih et al. 2018). In contrast, the legitimacy theory provides a comprehensive view of disclosure, as it argues that companies are working hard to gain legitimacy by disclosing their activities. Suchman (1995) defined legitimacy as ‘‘the actions of an entity are appropriate within some socially constructed system of norms, values, beliefs, and definitions’’. In the field of data disclosure, the legitimacy theory is the most discussed in the literature that deals with environmental and social disclosure (Mousa & Hassan, 2015). According to legitimacy theory, companies are subject to what is called a “social contract”, which is an unwritten contract between the company and the surrounding community. Lindblom (1994) argues that any breach of this social contract negatively affects the legitimacy of the company and thus threatens its existence in society. This explains the increased pressure companies are exposed to by stakeholders to reveal their environmental performance (Mahmood et al. 2017). Where the environmental disclosures are one of the important strategy’s companies use to obtain legitimacy in society (Campbell, 2003). Also, companies believe that they are subject to criticism and pressure, and they must provide various International Journal of Academic Research in Business and Social Sciences Vol. 1 0 , No. 3, March, 2020, E-ISSN: 2222-6990 © 2020 HRMARS 334 disclosures to gain confidence from stakeholders (Campbell, 2003). Li et al. (2018) argues that stakeholder pressure is not a direct factor in improving companies’ environmental performance, while the legitimacy pressure is the direct factor in pushing companies to provide more environmental contributions and disclose it in their annual report. Ownership Structure Finally, the hypotheses related to the ownership structure variables, are developed as below: Foreign Ownership Foreign investment contributes to supporting the private sector and overcoming many economic and social problems, such as unemployment (Dahawy, 2009). On the other hand, the presence of foreign shares in companies is an important tool in pushing companies towards more disclosure (Tsang, et al. 2014). The legitimacy theory supports this trend, as it considers that foreign ownership contributes to legitimizing the presence of companies. Previous studies supported the idea that f