What is the real issue with Watts and Zimmermans opinion on social disclosure?
Please can any accounting scholar give me a brief summary of the issue?
https://www.researchgate.net/publication/312498724_Disclosure_of_Accounting_Information_AI_for_Investors_in_Stock_Exchange?ev=prf_high
Dear Jerry
In positive accounting theory, W&Z believe that the accounting information (including social disclosures) generated in financial reports is not solely the result of the choice of accounting techniques used in generating accounting information; rather the accounting information generated in financial reports is determined by the accounting and non-accounting decisions that managers take into consideration when generating such accounting information.
W&Z's opinion on social disclosures is that accounting numbers alone cannot be relied on to measure the impact of firms' activities on the environment or society (per social and environment accounting, SEA), which in a sense makes a lot of top scholars cast doubt on the credibility of any empirical research in social and environmental accounting because accounting numbers reveal very little about society and the environment.
There is no doubt that SEA is an important issue, its just that accounting numbers do not fully capture the extent of damage done to the environment or society. For this reason W&Z's Theory will require you to rely on some non-accounting metrics to measure CSR or environmental accounting.
Hope this helps!
Peterson
@ Dear Ozili. Thank you very much for this information. It really helped.
@ Hassan: I appreciated the paper. Thank you.