given our belief that such designation is
likely to positively influence external perceptions of corporate
environmental reputation. Based on a sample of 92 US
firms from industries facing higher levels of environmental
exposure and using reputation scores as identified in
Newsweek magazine’s rankings of the greenest corporations
in America, we find that environmental performance
as captured by Trucost environmental performance scores
is actually negatively related to both reputation scores and
membership in the DJSI. We argue this negative relation is
due to the voluntary disclosure practices of the sample
firms. Consistent with several prior studies, we find that
environmental performance is also negatively related to
the level of environmental disclosure (worse performing
companies make more extensive disclosures). We also document
a significant positive relation between disclosure
and both the environmental reputation measures and
membership in the DJSI. Thus, the higher levels of environmental
disclosure appear to mediate the potential negative
effects of poorer performance on environmental reputation.
Finally, as expected, we show that DJSI designation
positively influences perceptions of corporate reputation.
While results are fairly robust to alternative sensitivity
tests, supplemental analysis indicates that the direct
relationships between disclosure and environmental
reputation and environmental performance and reputation
may be sensitive to firm size. We also find that the effect
of environmental performance on DJSI inclusion and
environmental reputation is also sensitive to industry
classification, whereas the overall pattern of mediating
relationships remains. Nevertheless, the direct and indirect