Differences in Environmental Disclosure between the Multinational Oil companies

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This study will examine the difference in environmental disclosure between Libyan companies and multinational companies (MNCs) and their subsidiaries in Libyan oil context. Environmental disclosure is defined as the disclose environmental activities, identify environmental risks of such activities, and how they are managing these issues. Disclosure shows effects on the environment as a result of accidents that occur in the oil companies. Environmental disclosure refers to how and to what extent firms disseminate information about their environmental activities. This information may be released within the company annual reports, or separate sustainability reports. There is a vast amount of research that has been conducted about environmental disclosure, in particularly in developed countries. In contrast to developed countries, there are a few studies undertaken in developing countries. There are also no studies that have examined the difference in disclosure between the developed and developing countries (Al-Tuwaijri, Christensen et al. 2004; Ahmad and Gao 2005; Ahmad and Mousa 2010). Research on the level of disclosure and difference of disclosure is limited in Libya and some developed countries, which have firms operating in the Libya oil sector. This study will examine disclosure practices in Libya from the perspective of Libyan firms and Multi-national companies (MNCs). In addition, this study investigates the question of disclose of environmental information is reported in annual reports.

Research question

The national, subsidiaries and multi-national companies disclose their environmental practices to achieve their objectives of disclosure. However, it is not obvious whether companies that operate in the oil sector are following similar procedures and techniques in disclosure processes. The main research question for this study is:

RQ 1: what factors impact on the reporting of environmental data in local corporations and subsidiaries of MNCs in the libyan oil sector.

The following sub-questions have been designed in order to answer the main question

RQ1a: what are the difference between local firms and MNCs in regards to the disclosure of environmental data in their annual reports and quality of that data?

RQ1b: why do these differences in regards to the disclosure of environmental data between Libyan firms and MNCs?

This study seeks to identify the level of voluntary environmental disclosure by comparing local and multi-national companies operating in the oil sector. It aims to identify the differences between multi-national companies and their subsidiaries and domestic companies in their disclosure of environment information and to understand the reasons of disclosure and whether there are any differences. Prior studies such as Douglas et al. (2007) tend to stop at descriptions of cross-country differences in levels of environmental disclosure information in the annual reports. By contrast, this study attempts to go one step further by explaining observed differences in this field. Most specifically, the main concern of this study is to examine the notion that disclosure by multi-national companies requires not only disclosing environmental impacts on the home country's society, but also requires disclosing environmental information by their subsidiaries to the host country's society (Petkoski and Twose 2003; Koerber 2009). This means, subsidiaries of foreign corporations operating in Libya are binding to disclose to society and disclose its environmental activities, similar to the parent companies of the local community. The research continues this theme by mainly focusing on environmental disclosure of subsidiaries of MNCs in general, and subsidiaries of different countries MNCs, in particular. Therefore, the study attempts to examine firstly, the actual environmental disclosure and responsibility practices to local companies in the oil sector and secondly, the environmental disclosure of subsidiaries of MNCs in general in Libya and environmental disclosure by global MNCs in particular which have subsidiaries operating in the Libyan oil sector.

Research objectives

This research project has four major objectives. First, it will evaluate the level of environmental disclosure relating to annual reporting in MNCs and their subsidiaries. Second, the project will explore whether corporate environmental disclosure in subsidiaries is different than in their parent companies. Third, it will investigate corporate disclosure practices and the role of stakeholders in disclosure process using stakeholder theory and institutional theory in the host countries context (Libya). Finally, this research will provide insights into assisting the local firms by informing them about the nature of the relationship between MNCs and their subsidiaries, in terms of corporate environmental disclosure and type of environmental information and ways disclose in the annual reports.

Scope of the study

Identifying environmental disclosure that is employed by companies frames the boundary of the research. This research will involve approximately 60 companies in Libya, including local firms, MNCs and their subsidiaries, which operate in the oil sector. It will review the literature that relates to environmental disclosure and several items of relevant literature will support this research in order to fill the gaps in this research.

2.0 Background of the study

Over last few years corporate social accounting has grown to include environmental activities and environmental issues such as environmental litigations and environmental pollution. These issues have become more prominent economic, social and political problems throughout the world (Yusoff and Lehman 2005; Joshi and Gao 2009). The social accounting has attracted environmental accounting and international communities in order to increase transparency in disclosure. This, in turn, has created the prompt attention to MNCs to demonstrate their activities and practices in particular with regard to the environment (P.L. Joshi, Al-Mohadki et al. 2005; Islam and Islam 2010). The Operating companies, particularly in the oil industry, involve environmental calamities resulting from environmental incidents affecting the surrounding operations of companies (Rena 2008). Increases in public concern and pressure on the companies in order to disclose their environmental activities, which cause environmental incidents, is evident (Cormier and Magnan 2007; Islam and Islam 2010). Multinational companies face many problems when disclosing environmental information in dissimilar countries because of the variation in the economic conditions and government regulations (Tan 2009). In such a situation, Islam and Islam (Islam and Islam 2010) state that when conflict arises between international companies and local communities regarding disclose of environmental activities, international companies must adopt clear strategies for the disclosure of environmental activities as a result of industrial operations, whether its operations are in developed countries or developing countries and take into account any conflict and pressures in those countries. Most comparative studies about voluntary disclosure of environmental information by companies have been conducted in Canada, Europe, Australia and the United States. Research has investigated the impact of disclosure on multi-national companies in Asia, America and Europe (Williams and Aguilera 2008; Sawani, Zain et al. 2010). By contrast, Libya has been overlooked even though it is one of the largest world suppliers of crude oil and gas to Western countries (Al-Hengari, El-Bousiffi et al. 2007; Boukerrou 2009).

The oil sector is one the most important economic sectors in Libya, where many local and multinational companies work. The Libyan economy is a consumer economy, relying mainly on the resource depleted (oil and gas), despite the strong push in the economy towards programs of development of the economy post-seventies. The Libyan economy is still linked organically, mainly to the oil and gas sector, and in particular in the provision of financial resources. the resources of oil contribute to economic and social development as a source of funding or energy. The oil sector in Libya has witnessed a remarkable development in recent years, especially after the lifting of the economic embargo on Libya in 2003 in various fields starting from exploration, production and the manufacturing processes. In this period, the daily production rate of crude oil has increased due to increased investment for foreign companies in this sector. Libya's oil sector contributes to the state's revenue, which was approximately 92% during the period from 2005-2008 (Boukerrou 2009; Khalifa 2010). This development in the Libyan oil sector and increased oil investment has resulted in various international companies working and investing in Libya's oil industry. Thus, it is evident that there is a difference in accounting procedures and disclosure between different companies.

Presently, researchers have argued that national differences in proceedings with firms in the same business are not very different but with overseas firms, are very important (Miroshnik 2002; Joshi and Gao 2009; Jones 2010). The impact of the existing differences as a result of differing practices should be recognised, whether big or small or in international or local company, thus, disclosure processes differ between local and multi-national companies operating in the oil sector (Lee and Sidney 2005; Radebaugh, Gray et al. 2008). This remains the case despite the importance of the oil sector to improve the economy and multi-national relationships. Due to a lack of research relating to how environmental information is disclosed in annual reports of national and multi-national companies, operating in developing countries including Libya, further investigation is required (Ahmad 2004; Al-Tuwaijri, Christensen et al. 2004; Cho and Roberts 2010; Seetharaman, Ismail et al. 2010), Ismail et al. 2010). This study will examine the level of disclosure of environmental information in domestic and multi-national companies, which have subsidiaries operating in the oil sector in Libya. As a result, this study will focus on the current state of environmental accounting, disclosure practices and difference of disclosure levels between local companies and multi-national companies, by examining and analysing a sample of the annual reports of national, subsidiaries and multi-national corporations.

3.0 Literature review

3.1 Introduction

In last two decades, the accounting literature has witnessed a growth in the number of studies regarding corporate environmental disclosure. During this period, social and environmental studies have used theoretical frameworks, such as stakeholder theory and legitimacy theory and the theory of political economy. Moreover, content analysis has become a main method in several studies to analyse annual reports regarding the social and environmental disclosure (Guthrie, Petty et al. 2004; Kaya and Yayla 2007; Lu 2008; Deegan and Rankin 2009; Guthrie, Petty et al. 2009; Mathews 2009). In addition, these studies have sought to examine changes, which occur in organisations as a result of social and environmental accounting in terms of explaining the social and environmental reporting practices, and setting some interpretations, which are compatible with these changes. Also, in this period, many studies have been conducted on examining the motivations and determinants of social and environmental disclosure practices (Tinker and Gray 2003; Al-Tuwaijri, Christensen et al. 2004; Parker 2005; Magness 2006; Lu 2008; Elsayed and Hoque 2010). Thus, the period of marked growth in research of social and environmental disclosure in terms of studying the determinants and motivations of environmental disclosure, as well as the factors that affect on level of disclosure, it can been said that the aim of this paper is to review the previous studies that are relevant to corporate environmental disclosure in the two last decades. Literature reviews during this period provide suitable ideas for researchers who have written on corporate environmental disclosure. Accordingly, it assists in identifying any gap in the studies conducted in developed countries or in developing countries in terms of differences and relationship between firms in both countries.

3.2 In developed countries

The developed countries have possessed a high proportion of studies of environmental and social disclosure over the last decades, where research has been conducted in developed countries regarding environmental disclosure (Emtairah and Mont 2008; Joshi and Gao 2009). These studies have aimed to measure the disclosure of environmental information (Mitchell, Percy et al. 2010), and increase the rate of information disclosure in annual reports (Frost 2007; Mitchell, Percy et al. 2010). As well as this, examining the stock market reaction in terms of discloses of pollution and expenditures of control pollution, it can also be concluded that disclosure is very different between companies in terms of expenditures. It is worth stating that the industrialised countries such as Western Europe, the USA, Canada, and Australia are mainly in the areas of environmental disclosure. These studies have focused on comparing differences in environmental disclosure in developed countries through the companies operating in those countries (Ernst & Ernst, 1978; Guthrie & Parker, 1990; Tsang, 1998). Tsang (1998) made the following comments in recent studies on social and environmental disclosure respectively:

Although Corporate Social Reporting (CSR) has been the subject of substantial academic research for more than two decades, the CSR literature is dominated by empirical studies in the industrialised countries of Western Europe, the USA and Australia. Even international comparative studies of CSR have focused on analyses of the differences and similarities of CSR practices in these countries only.p.624

Mitchell, Percy et al (2010) mentioned that the first studies in Australia about environmental disclosure were by Deegan and Gordon. The findings of this study of environmental disclosure were positive but there was only 7% of the sample provided by firms. Also it concluded that environmental disclosure evolved only between 1980 and 1991. Moreover, environmental disclosure was positive with sensitive industries. In general, Australian firms tend to environmentally disclose and provide environmental information (Deegan and Rankin 1996; Frost 2007). Further, (Lu 2008) suggests firms increased the level of environmental disclosure, because of the surge of environmentalism. The researchers indicated disclosure correlated with increases in social concern about environments and relationships between firm's environmental performances with kinds of industry. In Canada, (Bewley and Li 2000) mentioned that Canadian manufacturing firms tend to increase disclosure of environmental information whenever events affecting the environment have increased. In another study conducted by (Singh, van der Zahn et al. 2007) the size of firms is the dominant factor determining the extent of social and environmental disclosure practices in the oil and gas industry, while in the UK, (Brammer and Pavelin 2006) states that there are differences between sectors in terms of determinants which affect disclosure decisions and there is a positive relationship between the size of the firms and the quality of environmental information.

Decision makers in firms, particularly in developed countries, play significant roles in voluntary environmental disclosure. Investors do not obtain some information if decision-makers believe that investors do not need to have information or this information is available in other sources (Cormier and Magnan 2003). Managerial decisions in companies with regard to environmental disclosure are subject to determinants. Some researchers noted in their studies that the size of the company is one of the determinants of managerial decisions, and indicates a positive relationship between firm size and the level of environmental disclosure. While some other studies concluded that the sensitivity of the industry is determinant to the process of disclosure (Cormier and Magnan 2003; Xiaomei 2004; Marshall, Brown et al. 2009). Also, the financial situation of the company influences the decision of environmental disclosure. Those studies found that when the company's financial situation is well, the company will be more likely to provide environmental information.

In summary, it can be summated that environmental research deals with three main axes: The first group of studies examines the factors affecting managerial decisions to disclose environmental information. The second group is related to the value relevance of environmental disclosure. The third group explores the relationship between environmental disclosure and environmental performance (Berthelot, Cormier et al. 2003; Lu 2008). (Ying 2006) found through comparing the levels of disclosure between the UK, Hong Kong, and Canada that United Kingdom's firms have higher disclosure levels as compared to Canada's and Hong Kong firms and variance in disclosure is based on the type of industry.

3.3 In developing countries

The developed countries have conducted most of the studies of social and environmental disclosure over the past two decades, while developing countries have had a handful of studies, in particular on the countries with emerging economies (Belal 2000; Naser, Al-Hussaini et al. 2006; Smith, Yahya et al. 2007). The studies have been conducted in India by (Sahay 2004; Pramanik, Shil et al. 2009) and in Malaysia and Singapore by (Andrew, Gul et al. 1989; Yusoff and Lehman 2005) (Smith, Yahya et al. 2007) and by (Choi 1999),( (Dasgupta, Hong et al. 2006) in Korea. it can been said that most of these studies conducted in east Asia have concluded that environmental disclosure is inadequate as compared to developed countries and the reactions are bad toward these environmental laws.

In the context of Africa, there are few studies that have conducted social and environmental disclosure, such as (Savage 1994) who examined 115 firms in South Africa. This study concluded that average disclosure was a half page. This conclusion was in 63% of the total enterprises. In another study by (Kisenyi and Gray 1998) in Uganda, it was noted that the level of disclosure was low. In addition, environmental disclosure has been conducted in MNCs in a study by (Disu and Gray 1998) in Nigeria. The finding of this study was that although there are consumer concerns about environmental disclosure, there were a quarter of companies interested to environmentally disclose from 22 firms in the sample study between 1994 and 1995.

In comparison, social and environmental research examining the Arab regions remains scant, but there some attempts. For example, (Kamla 2007) examined the social and environmental disclosure in 68 firms in nine countries of Arabia's Middle East namely : Bahrain, Egypt, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, Syria, and United Arab Emirates, as well as in Bahrain by Al-Bastaki and Joshi; 2000, in Saudi Arabia by Mirghani; 1998, as well as in Jordan by Mahmoud Al-Akra, 2010. In addition, (Hossain and Hammami 2009) examined the effects of some characteristics of firms on levels of environmental disclosure listed in markets in Qatar. (Rizk, Dixon et al. 2008) investigated the social and environmental disclosure in 60 firms in the Egyptain industry sector, while in Libya and Tunisia, (Kilani, 1988; Buzied, 1998; Saleh, 2001, (Ahmad 2004; Ahmad 2010) , (Haj and Aaydi 2010) examined the relationship between levels of disclosure and environmental performance through the local companies industrial and financial sectors respectively. The findings of these studies suggest that the levels of disclosure are low and that this has a negative effect on environmental performance. Moreover, there are other factors that have affected environmental disclosure such as political and economic systems that have been influenced by the period of colonialism. Therefore, a lack of research particularly in the Arab region, including Libya is the motivation for this study. Study of environmental disclosure in Libya has not yet been adequate and there is a set of circumstances and problems surrounding multinational companies operating in Libya, which influence processes of environmental disclosure. Further, in Libya, as an example, the political system depends on the "Third Universal Theory" of the green book. As a result, Libya witnessed a big change in the economic during last few years and addition it has a unique political system in the world.

3.4 Motivations of environmental disclosure:

Environmental disclosure is different from country to country. This difference is due to many factors such as national culture, accounting regulations, economy, governmental actions, the severity of environmental problems, and the existence of pressure groups (Jenkins and Yakovleva 2006). Moreover, firm size, pressure groups, profitability, consumers, lenders, Shareholders and Investors are factors that impact on levels of disclosure (Ahmad 2004; Fathyah and Norman 2007; Grüning 2007). However, it is worth mentioning that pressures for corporate environmental disclosure vary from country to country and from region to region, especially between developing and developed countries. Jorgensen and Soderstrom (2008) mention legal institutions, environmental regulation, and disclosure regulation are varying from country to country, leading to differences in environmental disclosure. As well as this, rich countries have the capacity to enact laws, which help to environmental disclosure.

Also in this context, literature shows that some studies have addressed the impact of disclosure is affected by a variety of factors that may affect the increase or decrease in disclosure. One of these factors is the firms' size. Many researchers have studied relationship measures of firms' size with environmental disclosure. The research suggests that larger companies are more likely to be under public scrutiny and pressure from many groups. Pressure from stockholders, governments and environmental groups, is also on the large firms' more than small firms (Brammer and Pavelin 2006; Llena, Moneva et al. 2007; Dong and Burritt 2010). Another factor is profitability. Profitability is not a determining factor to information that is disclosed by firms. Brammer and Pavelin,(2006) state; ''the results suggest no significant relationship between current profitability and the propensity to make environmental disclosures''p.1183. Moreover, sensitive industries have an effect on environmental disclosure. Environmentally sensitive industries are be under pressure to increase disclosure about environmental activities (Momin 2006; Singh, Lou et al. 2007; Hougen 2009; García-Ayuso and Larrinaga-Gonzélez 2003; Llena, Moneva et al. 2007; Singh, Lou et al. 2007; from Oregon 2008; Hougen 2009; McKinley 2009).

Environmental disclosures in multi-national companies have been mentioned in the literature whereby, there are many studies on environmental disclosure and the various activities undertaken by multinational companies (Jose and Lee 2007; Joshi and Gao 2009). Multi-national companies are under pressure and scrutiny from domestic competitors where they face institutional pressures from stakeholders such as governments, customers and from within their own industry, to present environmental communication, in order to be deemed environmentally legitimate (Hunter and Bansal 2007). The stern requirements in MNCs is cause for more disclosure (Sejjaaka (2007). In contrast, most research does not mention the impact the MNCs have on their subsidiaries or about procedures of the disclosure which subsidiaries operating in such as an environment different to the environment' work of the parent company. Although, subsidiaries do have influence on their parent firm's legitimacy (Yang and Rivers 2009).

In summary, most research conducted in developed or developing countries alike, examined the local companies, in particular in industry and financial components. Moreover, the comparisons made between the countries are mostly between developed countries such as Britain and Germany, the U.S.A, Canada, and the U.K (Buhr and Freedman 2001; Holland and Boon Foo 2003), and the U.K and Germany (Beck, Campbell et al. 2010) , but if there are few comparisons between developing and developed countries, they are among the local companies in both countries, Thus, international oil companies and their subsidiaries are not focused of environmental research in terms of the relationship between them(Schmid and Maurer 2010), which gives this study a new dimension by comparing the differences in disclosure between those companies and local firms in host countries.

3.5 Gap in the literature

After reviewing the literature, relevant previous studies were briefly analysed. The existing gaps were identified in the literature which will give an impetus for this study and need to be bridged namely: the need to examine the relationship between multinational corporations and their subsidiaries, regarding environmental measures used in each. Moreover, the linkage between different or similar levels of disclosure between subsidiaries and their parent companies is still unexplored. Investigation of the impact of political and economic conditions in the host countries of the subsidiary companies and environmental reporting to them must be considered. The call for examining corporate environmental disclosure practice in host countries such as Libya where there is no previous study for this country is also required.

3.6 Jistifications of study

Most previous research on corporate environmental disclosure has focused on developed countries. Such as Canada, Australia, New Zealand, the USA, the UK, Japan, and Spain. Moreover, most multinational companies belong to developed countries, and thus have experienced an upsurge in disclosure unlike developing countries, including Libya, although most of their subsidiaries operate in developing countries. This study explores corporate environmental disclosure and level of environmental disclosure about issues in Libya mainly in foreign subsidiaries, gaining insights from developed countries about corporate environmental disclosure practices of their MNCs. However, evidence of comprehensive research in Libya into corporate environmental disclosure is also rare(Ahmad and Mousa 2010). In particular, there is no previous detailed study found of corporate environmental disclosure practices of subsidiaries of MNCs in Libya. Finally, despite several comparative studies of cross-country practices in Western Europe, the USA and Canada, to the researcher's knowledge there have not until now been any detailed comparative analysis of corporate environmental disclosure between a parent company and its subsidiaries in the oil sector specifically.

3.7 Contribution of the proposed research

3.7.1 Contribution to literature

There are a lack of studies that have focused on the link between oil multi-national companies and their subsidiaries. Therefore, the proposed research will contribute to the literature in several ways. First, this study develops comprehensive definitions and measures for disclosure values and environmental activities. Second, the proposed research extends prior research that links environmental performance-disclosure with responsibility, by investigating the association between different disclosure and the levels of disclosure. Third, this project is the first known study in the Arabia region to investigate the interrelations between parent multinational companies and their subsidiaries.

3.7.2 Contribution to practice

The key purpose of this research is to provide an explanation for the differences between a level of disclosure in local firms and MNCs and addition to their subsidiaries. Therefore, it is expected to contribute to practice in several ways. Firstly, there is a growth of concerns about the role of subsidiaries in modern business in developing countries (Jenkins and Yakovleva 2006; Hunter and Bansal 2007; Singh, Lou et al. 2007). Hence, institutional investors and affiliated organisations can use this study to recognise what extent firms are considering and disclosing the potential environmental activities. Secondly, a firm's management can recognise the potential conditions in which they operate subsidiaries. Also, this research will seek to extend the environmental reporting knowledge in order to fill the gap between the environmental practices and environmental reporting in local firms and international companies. Furthermore, it provides better insights into know the underlying reasons and motivations for environmental disclosure reporting in oil firms and addition to understand considerations made by companies in order to disclose or not disclose the environmental information.

4.0 Theory and hypotheses

4.1 Stakeholder Theory

At the start of this century, the notion of responsibility of organisations toward their owners was prevalent, specifically in relation to maximisation of profit for shareholders and investors are the primary strategies of firms. With the passage of time, the business environment becomes thornier and regulated, so business operations have changed radically. Therefore, stakeholders need more information about the organisation's activities. On the other hand, organisations are considered as a part of the social system. Hence, there is a correlative relationship between the organisation and its stakeholders. It is therefore argued that the firm's success depends on the ability of organisations to manage the relationship between them and stakeholders. Accordingly, the organisations should provide their stakeholders with all information relating to corporate activities according to the claim of Stakeholders Theory. It is worth noting that Stakeholder Theory involves the identification of a firm's stakeholders and clarifies the ethical and environmental obligations of management with regard to stakeholders (Scholl 2001; Bremmers, Omta et al. 2007; Elijido-Ten 2007; González-Benito and González-Benito 2010).

Many researchers have conducted studies in environmental disclosure using Stakeholders Theory. This Theory seeks to explain and analysis decisions which relate to environmental disclosure and to the extent of corporate response to meet the stakeholders demands supported by Ullmann's model to understand the determinants of disclosure (Husillos and Alvarea-Gil 2008; Chan and Kent 2003; Elijido- Ten 2007). Other researchers state that the success of any management depends on how firms manage relationships and meet the interests of stakeholders through building successful management in all relationships with its stakeholders. Stakeholder Theory depends on three aspects, namely descriptive, instrumental and normative (Donaldson and Preston 1995). The first aspect provides explanations and describes the theory, while the second aspect "instrumental", presents stakeholder management practices and corporate performance through relationships of cause and effect. The aspect of normative focus on relationship between disclosed information and organisational performance through stakeholder management practices and corporate performance is also required (Greenwood and De Cieri 2006; Marom 2006; Jones, Felps et al. 2007). Therefore, stakeholder theory presents three criteria including stakeholder power, strategic posture and economic performance. To develop the hypotheses of this study, the criteria of economic performance has been neglected omitted due to this study not seeking to examine performances in oil production. Therefore, the criteria of stakeholder power and strategic posture are the basis for the development of hypotheses in this study.

4.2 Institutional theory

Since the late 1970s, researchers have focused on developing institutional theory within management academic literature (Meyer and Rowan 1977; DiMaggio and Powell 1983; Zucker 1987). Researchers have used this theory in many different fields. For example, Dillard, Rigsby et al.(2004) and Deegan l (2009) indicate that institutional theory has been adopted by many researchers in different research fields such as accounting research, management accounting research, and it also has been applied in accounting research to study the practice of accounting in corporations. Deegan (2009) provides reasons why institutional theory is relevant to voluntary corporate reporting practices. These reasons are the institutional theory provides complementary perspective in terms of understanding organisations to pressures, changes, and expectations in society, as well as it links organisational practices to the values of the society. In other word, this theory helps organisations to understand perceptions of their practices characteristics with social and cultural values of society.

This theory assumes that management practices in organisation are legitimate by other organisations in their fields, and the structures or procedures are socially accepted, as well as it based on the organisations response to the pressures through the operating environment of the organisation (Carpenter and Feroz 2001). In this theory, the two main dimensions, which are relevant to explaining voluntary corporate reporting practices, are isomorphism and decoupling. DiMaggio and Powell (1983) defines the isomorphism as "a constraining process that forces one unit in a population to resemble other units that face the same set of environmental conditions", and provides three different isomorphic processes which are coercive isomorphism, mimetic isomorphism and normative isomorphism (p. 149). While the decoupling means that the organisation might adopt a specific exercise, although the actual practices of the organisation can be very different from these practices. This focus is derived from the perspective of managers (Deegan 2009).

4.3 Development hypotheses

It is apparent that identifying the stakeholders is necessary. A stakeholder is "any group or individual who can affect or is affected by the accomplishment of that organization's goals" (Freeman, 1984, p. 46). According to Ullmann's model (Greenwood and De Cieri 2006; Elijido-Ten 2007), the factor of disclosure is influenced by the stakeholder's power. It is worth noting that it is difficult to examine all the stakeholders. According to this restriction it must be specified that stakeholders are those members of a firm who have the ability to exercise the strongest power on the management of the firm. This study chose representative stakeholder groups, namely shareholders, managers and government. These representatives were chosen because these shareholders are the largest group of stakeholders and are primary providers of capital, while managers are the decision makers within companies, and governments have the ability to enact legislation and to punish companies that cause harm to the environment (Brammer and Pavelin 2006; Elijido-Ten 2007; Elijido-Ten 2009). This means that stakeholders "shareholders, managers, and governments'" have a significant weight to put pressure on companies to disclose their environmental activities (Saleh, Zulkifli et al. 2010), which might give reason for the difference in disclosure process between MNCs and their subsidiaries on one hand, and between MNCs and their subsidiaries and Libyan companies on the other (Hunter and Bansal 2007). To test this difference in disclosure, the hypotheses for this study are to examine:

H1: The difference in disclosure between MNCs and their subsidiaries is a result of the difference in pressure stakeholders' power.

H2: MNCs and their subsidiaries face more pressure from stakeholders' regarding the disclosure of environmental by high quality than local firms.

Using of different strategies may to meet stakeholders' demands. The stakeholders' demands vary according to each group; this implies that firms should monitor their relationships with main stakeholders to achieve optimum relationships with stakeholders. One of these strategies that firms should take into account is to determine the environmental position of the firm. The environmental position of a firm requires monitoring the position toward environmental activities and relationships of stakeholders with these activities. This means that the positions on the environmental impact of the environmental activities in companies differ from company to company. Therefore, the environmental positions of local companies toward environmental activities might differ to MNCs or their subsidiaries. This situation leads to the following hypothesis:

H3: The environmental issues have disclosed with more environmental information of higher quality in MNCs and their subsidiaries, which display an active position than firms displaying a passive posture.

H4: The passive positions toward environmental issues and activities are higher in local firms than MNCs and subsidiaries.

5.0 Methodology

In this study, quantitative and qualitative research will be used to collect data. In recent years many researchers turned to use the mixed-method "quantitative and qualitative research " for many of reasons. Use this method gives support to stakeholder theory , in the implementation of management decisions on the annual reports of the environmental disclosure. also it gives to the social research depth and clarity, and present the a fuller image for companies, which are relevant to environmental decisions. moreover, use of both quantitative and qualitative research facilitate analysis processes of information, especially in MNCs.;(Elijido-Ten 2007; Creswell 2009); Ahmad 2004; Momin 2006; (OHYPERLINK "#_ENREF_70"'HYPERLINK "#_ENREF_70"Dwyer and OHYPERLINK "#_ENREF_70"'HYPERLINK "#_ENREF_70"Flynn 2005). to achieve of the aim of this multi-method methodology '' quantitative and qualitative research '', this research will be used in three stages as follows:

5.1 Questionnaires

According to (Sharp, Howard et al. 2002; Sekaran 2009) over the past century, questionnaires have become a common method to obtain information through a set of questions written to respondents, in order to know their opinions about particular subjects. Examining a managers or Individuals' perspectives can be conducted using either questionnaires or interviews ( (Hussey and Hussey, 1997), especially regarding the nature of corporate environmental activities and corporate environmental disclosure (Ahmad 2004). also. the questionnaire is most popular method and used by majority of studies in order to investigate corporations' issues in relating to corporate environmental disclosure (Nafez 1995; Parsa 2001; Ahmad 2004; Liouka 2007; ABDULLA 2010).

In this study, questionnaires will be distributed in two parts. The first part of questionnaire will be in Libyan companies and subsidiaries of multinational corporations in Libya that the researcher personally administered see appendix (5). The sample target is the staff of financial management, environmental management and administration to production for both of Libyan companies and subsidiaries. The number of questionnaires in this part is 300 Form. 200 Form will be distributed in Libyan companies and 100 form in subsidiary companies. Part II of the questionnaire will be sent to the headquarters of multinational corporations by e-mail using Electronic link to achieve this goal. The sample target in this part is the same as the sample in the first part.

5.2 Interview

In second stage, this study will use the interview method so as to enhance the responses of the questionnaire both in Libyan companies or subsidiaries of MNCs in Libya. Kvale and Brinkmann (2009) mentions that interview provides the opportunity to speak explicitly about the subject of the research, thus, enhancing the reliability the study. In this research, the interviews will be face-to-face, because this approach gives freedom to interviewees and interviewer to ask and answer in friendly way. The face-to-face approach in this research will be conducted with managers and deputy managers of departments' financial, environment and production. Number of interviews in this study will be 30 interviews as follows: ten interviews in Libyan companies by 3 interviews in each company. Three interviews in subsidiaries by 3 interviews in each company. These interviews will be with Financial Director, Director of an environmental management, and Director of management of production in each company. Regarding the quality of questions in the interview, the researcher will follow the style of open-ended questions in the interviewer so that the questions are clear and understandable and far from the mystery. All interviews will be recorded in order to help in the process of transcribing.

5.3 Annual report

Over the past century many studies have concentrated on the content of annual reports in their examination of the nature of corporate environmental activities and corporate environmental disclosure. In this reseach will use the annual reports as a source of data. The target period for annual reports in this research will be during 2005 to 2010. Reason for choosing this period is the beginning of the return of foreign companies to invest in Libya after the lifting of the embargo imposed on Libya. many studies use of content analysis as a way to capture and organise data from annual reports (Parsa 2001; Ahmad 2004; Mashat 2005).

Content analysis, according to (Weber 1996; Bryman and Bell 2007) is a method or robust technique for codifying content of text into categories according to a system, in order to identify the characteristics of documents and texts based on specific criteria. Moreover, Guthrie, Petty et al.(2004) mentioned that there are several theories that have benefited from content analysis through applying this method to collect data and analysis such as Stakeholder Theory and Legitimacy Theory. With this in mind, this study will be based on the collection and analysis of data from annual reports of firms using content analysis.see the appendix 2

Weber (1996) and Wolfe (1991) listed a number of steps in the process of content analysis. First, identify the question(s) to be investigated. In this step, the study will seek to understand the environmental disclosure and environmental practices in MNCs and their subsidiaries, as well in Libyan firms. Second, determine the sampling units. The sampling units in this study will be the annual reports from 2005 to 2010 as a source of data. Third, determine and define the content categories; there are eight content categories chosen in this study which include regulation, regulatory compliance, policy and programmes, committee, membership, litigation, conservation, and environmental preservation (see Appendix 4). Fourth, test coding will be conducted on the sample of text. In this step, analysis of a sample of documents will be used to determine the practicality of the content analysis process where the researcher might obtain practical experience from testing a sample of the text, which contributes to increased reliability of content analysis results. Finally, aspects of assessing reliability and validity will be addressed. A test-retest approach used by Krippendorff (2004) will be used to obtain reliability of the content analysis. To enhance validity, as mentioned previously, categories of environmental disclosure have been defined.

6.0 Sample and Data Analysis

6.1 Sample

In this study, the target population will cover all Libyan companies and subsidiaries of MNCs (the USA, the U.K, Australia, Canada, Japan, France, Spain, Italy, Austria, and Germany) operating in the Libyan oil sector, as well as the parent MNCs. These companies are listed in the National Oil Corporation (NOC), as companies operating in the oil sector in the various disciplines of the oil industry (production, maintenance and drilling points, prospecting and exploration, manufacturing and petrochemical). Selected countries have great experience in environmental disclosure in their companies, thus benefits from these experiences will give support to this research. in addition to these countries have multi-nationality companies operating in developing countries, including Libya. The sample in this research will be as follows: The staff of financial departments, environmental management and administration to production, and in addition to the heads of those the departments, as well as annual reports for the period from 2005 to 2010.

6.2 Data Analysis

In this study will use three approaches to collect data. The main resources data will collect from questionnaire then, interview questions. Both questionnaire and interview will use to evaluate the difference in environmental disclosure. This study will also use a 5-point Likert-type scale for the measurement of the constructs in the questionnaire. The third method is secondary data, which will be collected from annual reports for five years (see Appendix 6). In this study, in order to analyse the quantitative and qualitative data, will be used descriptive statistics for test the quantitative data. This test will be in terms of distribution and normality and to describe information about levels of environmental disclosure. Qualitative methods will be used to analyse the data to clarify the environmental disclosure in companies.

6.2.1 Quantitative data analysis

In this research, descriptive statistics will be employed to test the data, which will be gathered through the questionnaire. Before the analysis, the researcher will check for missing data. A descriptive statistics method of analysis the quantitative data involves frequencies (counts and percentages) and measures of central tendency (mean). Use of central tendency will assist the researcher to describe the observations in a meaningful way.

6.2.2 Qualitative data analysis

Participants in interviews might not use the same terms to express their opinion. In other word, the interviewee might use different words for another to explain his opinion on certain points. So this study will include these points: data reduction, data display and extraction of conclusions. To analyse the interviews in this research, the researcher will use the content analysis as one of the most important techniques use in analysing qualitative data in research where the content analysis gives chance to use raw data through coding and categorising. To conduct this step of the data analysis the researcher will use the qualitative computer software Nvivo, because these programs will save time and gives opportunity the researcher to more focus on analysis. Furthermore, it will enhance the validity and reliability of the data and allow the researcher to analyse the data more objectively.




Start time

Finish time


Complete literature review, research design and methodology chapters, Design questionnaire and gain ethical clearance

1.10 .2010



Data collection


31.07 .2011


Analysis, interpret quantitative data and write up results


30 .11.2011


Analysis, interpret qualitative data and write up results


Interpret the overall results


31 01.2012


Finalise the first draft of findings and results


31 03.2012


Write up the first version of the discussion and conclusion


31 .05.2012


Re-review the literature and writing the draft of the thesis




Finalise the final thesis


30 .09.2012


Submit thesis