Learning to be green : accounting comparability and environmental violations

Abstract

Accounting comparability refers to the similarity with which similar economic events are reflected in the accounting choices of firms. Accounting comparability facilitates understanding and hence learning from peer firm disclosures. We show that accounting comparability is negatively associated with environmental violations. This relation is at least partly driven by learning from peer firms toxic releases disclosures. This learning is related to a reduction in the firms’ own toxic releases, which in turn reduces environmental violations. Our results provide novel evidence that accounting comparability facilitates green learning and therefore benefits society at large by reducing environmental harm.