Labor Market Institutions, Environmental Disclosure, and Environmental Impacts

Abstract

We examine how country-level labor market characteristics affect corporate environmental disclosure practices and the environmental impacts of firms’ operations. Using a sample of firms from 36 countries over the 2005–2016 period, we show that firms domiciled in countries with more developed labor markets have higher levels of environmental disclosure and less damaging environmental impacts than firms in countries with less developed labor markets. In addition, we find that firms operating in countries with better-developed labor markets tend to reduce their environmental impacts through the purchase of goods and services rather than through substantive changes to their own operations. Taken together, the findings suggest that better-developed country-level labor market institutions play an important role in improving firms’ environmental disclosure and in reducing their environmental impacts.