Relationship between Green Gas Emission and Firm Disclosure Level - Agency Theory

MGT723 Research Project
Semester 1 2018
Assessment Task: Research Proposal
Student Name:
Title:
Submission Date:
Topic: Agency theory
Question: Relationship between green gas emission and
firm disclosure level

Acknowledgement:
I certify that I have carefully reviewed the university’s academic misconduct policy. I understand that the
source of ideas must be referenced and that quotation marks and a reference are required when
directly quoting anyone else’s words.

Introduction
The research question is how firm risk consideration and disclosure level affect the level of carbon
emission that company. Global warming has brought advance climatic changes and more risk to the
plant. This has attracted more research and policy making to mitigate the risk caused by green gas
emission. CDP a company tasked to reduce the risk of green gas emission and to reduce companies’
carbon emission. The study will try to explain the relation between company size and carbon emission.
Literature Review
The agency theory is based on problems caused when an agent is acting on behalf of the principal.
Agency theory looks at the connection and relationship between a principal and agent. This connection
may between executive and stakeholders or executive and key publics. An agent is a representative of a
principal in any business transaction and is expected to represent the principal to the best interest.
Think of principal as person who owns the company and agent as the director. The agency theory
explains the relationships between the director and auditor (CDP). We will try to establish the
relationship of CDP with level of carbon emission by the organisations. The auditor is an agent to the
shareholder (Freeman et al, 2013).
Many studies have been carried out to explain relationship between carbon emission and size of the
company. No consistency has been established by these researches. Eleftheriadis & Anagnostopoulou
(2015) found a negative relationship between firm size and the level of green gas emission. Small firms
had low carbon emission and higher disclosure level. Small firms are ready to compile with the law
stated with fear forced closure as compared to large firms.
Clarkson et al (2008) found a positive relationship between green gas emission and firm size and
disclosure level and firm size. Large firms release verifiable information on carbon emission and their
good performance to differentiate these firms from the inferior firms. These brought about the new
measures environmental performance which is firm size, risk management and disclosure level.
Conceptual Model
Carbon Risk
Management
- Superior
- Inferior
- Physical
- Regulatory
Voluntary
Disclosure
Firm size