Abstract
Introduction
In recent years, growing attention to sustainable development, corporate social responsibility, and the environmental consequences of economic activities has strengthened the role of environmental accounting disclosure within financial reporting systems. Investors and regulatory bodies increasingly monitor companies’ environmental performance and consider transparency in this area as a key factor in reducing uncertainty and improving risk assessment. Under these conditions, examining the economic implications of environmental disclosure, particularly its impact on firms’ financial risk, has become increasingly important.
Objective
The main objective of this study is to investigate the effect of environmental accounting information disclosure on the financial risk of companies listed on the Tehran Stock Exchange. The study aims to determine whether higher levels of environmental transparency can reduce stock return volatility, lower the cost of capital, and ultimately enhance financial stability. A secondary objective is to provide empirical evidence that supports policymaking in the field of environmental reporting.
Research Method
This research is applied in purpose and descriptive–analytical in method. The statistical population consists of 133 companies listed on the Tehran Stock Exchange during the period 2020–2024. Data were collected in a panel format and analyzed using multiple linear regression models based on panel data. In the research model, the level of environmental accounting disclosure is considered the independent variable, while financial risk indicators, including stock return volatility, debt-to-asset ratio, and cost of capital, serve as dependent variables. These indicators were selected based on the assumption that information transparency can influence investors' and analysts’ risk assessments.
Results and Discussion
The empirical findings indicate that environmental accounting information disclosure has a negative and significant effect on firms’ financial risk. In other words, higher levels of environmental transparency led to lower stock return volatility and reduced cost of capital, ultimately contributing to greater financial stability. Also, the results indicate that higher levels of environmental disclosure exert a significant lagged effect on firms’ financial stability, such that increased transparency in the current year leads to lower financial risk and improved performance in the following period. These results suggest that environmental disclosure, beyond its ethical and social dimensions, also holds economic value by reducing investor uncertainty and improving decision-making quality.
Conclusion
Based on the findings, it can be concluded that environmental accounting disclosure serves as an effective tool for financial risk management and enhancing investor confidence. Strengthening environmental disclosure standards and requirements by regulatory bodies can improve information transparency, enhance financial performance, and align corporate activities more closely with sustainable development goals. It is also recommended that companies improve the quality of their environmental reporting and leverage this capability as a strategic and competitive advantage in capital markets.