Impact of mandatory reporting around the world on environmental disclosure strategies in the architecture, engineering, and construction industry: A linguistic perspective

To address information asymmetry between firms and stakeholders, there are increasing country-level efforts to mandate environmental disclosures. Despite the growing focus on the role of mandatory environmental reporting, little is known about how such requirements affect the linguistic complexity of corporate environmental disclosures. This study fills this gap by focusing on corporate environmental disclosure strategies in the architecture, engineering, and construction (AEC) industry, one sector particularly sensitive to environmental concerns. Based on a staggered difference-in-differences design, this study investigates the impact of mandatory reporting on the linguistic complexity of AEC companies' environmental disclosures. Although such mandates typically do not specify how to disclose information, the results demonstrate that mandatory environmental reporting has a significant and negative impact on linguistic complexity. The interaction results suggest that the negative impact is more pronounced for firms with a higher number of independent directors on boards. The findings emphasize the significant role of mandatory environmental reporting in altering corporate disclosure strategies from a linguistic perspective, ultimately contributing to a more transparent and informative business environment.