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The real effects of mandated information on social responsibility in financial reports: Evidence from mine-safety records (Christensen et al. 2017)

Absence of conflict of interest.

Citation

Christensen, H. B., Floyd, E., Liu, L. Y., & Maffett, M. (2017). The real effects of mandated information on social responsibility in financial reports: Evidence from mine-safety records. Journal of Accounting and Economics, 64(2-3), 284-304. https://doi.org/10.1016/j.jacceco.2017.08.001

Highlights

  • The study’s objective was to examine the impact of mine safety disclosures (MSD) on health and safety outcomes.
  • The authors used a difference-in-differences model to compare the changes in safety citations and injury rates for mines that are required to include MSD records in financial reports with mines that are not.
  • The study found that including safety records in financial reports is associated with a significant reduction in mining-related citations and worker injuries.
  • The quality of causal evidence presented in this report is moderate because it is based on a well-implemented nonexperimental design. This means we are somewhat confident that the estimated effects are attributable to the mandatory inclusion of mine safety disclosures (MSD), but other factors might also have contributed.

Features of the Study

Mines owned by registrants of the Securities and Exchange Commission (SEC) are required to include mine-safety disclosure (MSD) records in financial reports, as per the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank). Alternatively, non-MSD mines are owned by non-SEC registrants and are not required to disclose mine safety data in public records.

The authors used a nonexperimental design to assess the impact of including safety records in financial reports on safety citations and injury rates. Mine-level data from 2002 to 2013 was obtained from the Mine Safety and Health Administration (MSHA) Inspection Violation and Accident/Injuries database, the CDC Address/Employment database, and the SEC Edgar database. The study included 2,726 MSD mines (owned by 151 SEC-registered firms) and 23,533 non-MSD mines across the United States. The study sample was constructed by matching MSD mines to similar non-MSD mines. The authors used statistical models to estimate the effects of MSD on citations and injury rates over one- and two-year periods. The models controlled for time trends, mine size, mine product (coal vs. non-coal), mine location (underground or above ground), mine district, inspection hours, and other mine-level fixed effects.

Findings

Health and safety

  • The study found that including safety records in financial reports is significantly associated with an 11% reduction in mining-related citations relative to the non-MSD mines.
  • The study also found that including safety records in financial reports is significantly associated with a 13% reduction in worker injuries relative to the non-MSD mines.

Considerations for Interpreting the Findings

The authors used a parallel-trends assumption (i.e., the safety trends for the MSD and non-MSD mines would be the same in the absence of the MSD) in the identification and grouping of mines for the analyses. They conducted multiple sensitivity tests to address the issue of the counterfactual treatment effect in the years prior to MSD (2002-2009), including the Mine Improvement and New Emergency Response (MINER) Act of 2006. However, it is possible that there are other variables not accounted for in their analyses that might violate this assumption and confound the findings (such as public outrage over a mining disaster).

Causal Evidence Rating

The quality of causal evidence presented in this report is moderate because it is based on a well-implemented nonexperimental design. This means we are somewhat confident that the estimated effects are attributable to the mandatory inclusion of mine safety disclosures (MSD), but other factors might also have contributed.

Reviewed by CLEAR

August 2020