The Mediation Effect of Business Environment on How Firm Characteristics Relate to Environmental Disclosure in Tanzania's Extractive Industry

Abstract

This study determines the function of the business environment as a mediating
factor on how firm characteristics relate to the environmental disclosure in the
Tanzanian extractive industry through legitimacy and stakeholder theories lens.
The analysis makes use of panel data from the 2018 Tanzania Extractive Industry
Transparency Initiative (TEITI) report covering the years 2004 to 2018, following
the adoption of an environmental management Act and its implementing laws in
Tanzania. To extract data from yearly reports, the manifest content analysis was
employed. The results show that the relationship between corporate profitability,
size, and environmental disclosure is mediated by pressure of stakeholders.
Furthermore, the findings imply that the relationship between size of firm and
environmental disclosure is mediated by visibility by the media. However, the legal
need does not operate as a buffer between any firm characteristic and
environmental disclosure, indicating that laws, regulations, and rules are not the
only drivers of environmental disclosure. For the first time, the study introduces,
quantifies, and examines the business environment as the only justification for
environmental disclosure. The study combines legitimacy and stakeholder theories,
treating businesses as entities with internal decision-making processes that are also
influenced by pressure from the outside world. The study also suggests that
enhancing environmental disclosure and business participation may not be possible
with just rules or legislation. The study demonstrates that stakeholder theory works
more effectively in situations when powerful stakeholders put significant pressure
on businesses to disclose environmental information. In terms of society, the study
would promote social involvement in ensuring that businesses disclose and protect
the environment so that people can live in safety.