Asian Review of Accounting

The impact of social and environmental information on managers’ decisions:

Experimental evidence from Indonesia
Afdal Madein Mahfud Sholihin
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Afdal Madein Mahfud Sholihin , (2015),"The impact of social and environmental information on
managers’ decisions", Asian Review of Accounting, Vol. 23 Iss 2 pp. 156 - 169
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ARA
23,2
156
Received 15 November 2013
Revised 6 August 2014
Accepted 8 August 2014
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Asian Review of Accounting
Vol. 23 No. 2, 2015
pp. 156-169
© Emerald Group Publishing Limited
1321-7348
DOI 10.1108/ARA-11-2013-0074
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1321-7348.htm
The impact of social and
environmental information
on managers’ decisions
Experimental evidence from Indonesia
Afdal Madein
Department of Accounting, Universitas Fajar, Makassar, Indonesia, and
Mahfud Sholihin
Department of Accounting, Gadjah Mada University, Yogyakarta, Indonesia
Abstract
Purpose – The purpose of this paper is to examine whether managers consider social and environmental
information in evaluating projects.
Design/methodology/approach – Built on the stakeholder theory, this study hypothesises that
managers consider social and environmental information in evaluating their projects. To test the
hypotheses, this study employs experimental design.
Findings – The authors find evidence that managers consider social and environmental information
in evaluating their projects.
Research limitations/implications – This study finds that social and environmental information
is relevant for managerial decision making, particularly in project evaluation.
Practical implications – Social and environmental information is considered relevant for project
evaluation decision. Hence, managers should be provided those information.
Originality/value – To the best of the knowledge, this is the first accounting study which examines
the effect of social and environmental information on managers’ decisions, particularly in the Asian
context using experimental approach. Previous studies only examined the effect social and environmental
information on external stakeholders, such as investors.
Keywords Social and environmental accounting, Stakeholder theory, Project evaluations
Paper type Research paper
Introduction
The traditional approach to rational decision making derived from economic theory
assumes that managers make decisions to maximise profitability (Harrison and
Harrell, 1993). Therefore, accounting information that shows economic performance is
the primary source of information in the project evaluation decisions (Staw, 1976;
Harrison and Harrell, 1993; Rutledge and Karim, 1999; Booth and Schulz, 2004; Chong
and Suryawati, 2010). Others, however, suggest that the current focus of business
should not be limited only to profit maximisation at the expense of the environment and
society (Larson and Gray, 2011; Atkinson et al., 2011; Boddy, 2002).
Increasing attention and concern over the social and environmental impact of business,
and the impact of social and environmental issues on business, have led a number of
companies to actively account for and manage them (Adams and Frost, 2008). A study by
EY and Boston College Center for Corporate Citizenship (2013) found that sustainability
The authors thanks go to participants of Asian Pacific Conference on International Accounting
Issues 2013, as well as two anonymous reviewers of Asian Review of Accounting, for their
helpful comments.
 (social and environmental) reporting is perceived to lead to: an improved reputation, Information
increased employee loyalty, reduced inaccurate information about the organisation’s on managers’
corporate social performance, helping the organisation to refine its corporate vision and
strategy, reduced waste within the organisation, improved relationships with regulatory
decisions
bodies, cost savings, increased consumer loyalty, improved access to capital, preferred
insurance rates, increased long-term profitabiity, and better long-term risk monitoring,
improvement, and management. In practice, the attention paid by business to social 157
and environmental information is shown by a KPMG (2013) survey which revealed that
93 per cent of the 250 largest companies in the world (G250 companies) now report their
corporate responsibility activities.
Research on the use of social and environmental information, however, has so far
mainly focused on external users. Only limited studies have tested the use of social
and environmental information for internal decision makers, including in the project
evaluation decision. Among the limited ones, to the best of our knowedge, none of them
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has experimentally examined the effect of social and environmental information

on project evaluation decisions, particularly in an Asian context.
Studies examining the use of social and environmental accounting information by
external parties include Guidry and Patten (2010), Rikhardsson and Holm (2008), Murray
et al. (2006), Hassel et al. (2005), Al-Tuwaijri et al. (2004), Milne and Patten (2002), Chan
and Milne (1999), Teoh and Shiu (1990), Anderson and Frankle (1980), Ingram (1978),
Hendricks (1976), and Belkaoui (1976). Most of them indicate that disclosure of social and
environmental issues has information content. These findings show that investors, as the
principals in the agency theory ( Jensen and Meckling, 1976) as well as external parties,
take into account social and environmental information in their investment decision
making. However, it is not clear whether managers, as internal users, consider such
information in their decisions, particularly for project evaluation.
Previous empirical research on project evaluation decisions (e.g. Harrison and
Harrell, 1993) has relied on the agency theory as the basic argument. Hill and Jones
(1992), however, pointed out a weakness in the agency theory, as it is unable to explain
implicit or explicit contractual relationships that occur in the company’s relationship
with various stakeholders, other than stockholders[1]. Stakeholders may include the
environment (Gibson, 2012; Starik, 1995) and society (Silver, 2012). To overcome this
weakness, another theory having wider coverage needs to be considered. The
stakeholder theory recognises the diversity of groups having a stake or interest in the
company’s operations (Freeman, 1984; Freeman et al., 2010). This theory has broader
scope than the agency theory as Hill and Jones (1992) said, as it includes implicit
or explicit contractual relationships with all stakeholders.
This study aims to examine the use of social and environmental information in
managers’ decision making. It aims to provide empirical evidence on whether managers
consider social and environmental information overlooked by Harrison and Harrell
(1993), Booth and Schulz (2004), Rutledge and Karim (1999), and Chong and Suryawati
(2010). It is expected to provide empirical evidence about how managers, as the internal
party, respond to social and environmental information.
This study has theoretical and practical contributions. From the theoretical perspective,
this study provides an explanation of how the internal party of companies, that is
managers, respond to environmental and social information. In practical terms, this
research may provide an insight on the importance of management accountants to provide
information about social and environment issues for managers’ project evaluations.
Demski and Feltham (1976) explain that the accounting information, which in this case is
 ARA social and environmental information, influences managerial decision making in two ways:
23,2 directly as an input to the decision, and indirectly as an influence on managers’ behaviour.
Therefore, social and environmental information could be used as information resources
and may cause managers’ behaviour to be more socially responsible at the same time.
The next section discusses the “Literature review and hypothesis formulation”. This
is followed by the “Research method” and “Results”. The paper closes with a
158 “Discussion and conclusions”.

Literature review and hypothesis formulation

Project management and accounting information
A project is a temporary endeavour undertaken to create a unique product, service,
or result (Larson and Gray, 2011). As a temporary endeavour, the project management
has a life cycle which includes planning, implementation, evaluation, and closure
(Boddy, 2002). In evaluating the results of the project outlined in the report, a new
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problem may be found. The problem can be social and environmental issues, as Larson
and Gray (2011, p. 11) state:
Businesses can no longer simply focus on maximizing profit to the detriment of the environment
and society. Efforts to reduce carbon imprint and utilize renewable resources are realized
through effective project management. The impact of this movement towards sustainability can
be seen in changes in the objectives and techniques used to complete projects.
Accounting is one of the main sources of information for managers’ decision making
(Davidson and Trueblood, 1961; Bruns, 1968; Hall, 2010). Accounting as an information
resource can help managers to develop knowledge of the work environment (Hall,
2010). Therefore, accounting should also be able to show the problems and benefits
associated with the social and environmental aspects in managers’ decision making.
The emergence of social and environmental issues encourages the development
of accounting to consider more than the economic aspect. This development has given
rise to environmental accounting that emphasises environmental impacts, which
extends to the social aspects (Schaltegger et al., 2006). Accounting of the social
and environmental impacts is often referred to by other names such as: environmental
management accounting that is only focused on the environmental aspects including
eco-control (Henri and Journeault, 2010) and environmental costing (Atkinson et al.,
2011); social accounting (Gray, 2002) that has its focus on the social aspect; social
and environmental accounting (Mathews, 1997), corporate social responsibility
accounting (Wall and Greiling, 2011), triple bottom line accounting (Elkington, 1997),
and sustainability accounting (Schaltegger et al., 2006) which combines the social
and environmental aspects.
Various studies using accounting information in the evaluation of the project
show only the economic aspect is considered (Harrison and Harrell, 1993; Booth and
Schulz, 2004; Rutledge and Karim, 1999; Chong and Suryawati, 2010). Meanwhile,
research on social and environmental accounting information has only focused on
assessing the use of this information by external parties, as has been shown by
Guidry and Patten (2010), Rikhardsson and Holm (2008), Murray et al. (2006), Hassel
et al. (2005), Al-Tuwaijri et al. (2004), Milne and Patten (2002), Chan and Milne (1999),
Teoh and Shiu (1990), Anderson and Frankle (1980), Ingram (1978), Hendricks (1976),
Belkaoui (1976). To the best of our knowedge, however, none of them has
experimentally examined the effect of social and environmental information on project
evaluation decisions, particularly in an Asian context.
 Stakeholder theory Information
Robert E. Freeman was a pioneer in the corporate stakeholder approach with a book on managers’
entitled Strategic Management: A Stakeholder Approach, published in 1984 (Donaldson
and Preston, 1995; Jones, 1995). The main idea of this theory is the need for
decisions
organisations to manage relationships with stakeholders groups: the groups or
individuals who can affect, or are affected by, the achievement of corporate objectives
(Freeman, 1984). Jones and Wicks (1999, p. 207) contend that the essential premises of 159
the stakeholder theory are:
(1) the corporation has relationships with many constituents groups (“stakeholders”)
that affect and are affected by its decision (Freeman, 1984);
(2) the theory is concerned with the nature of these relationships in terms of both
processes and outcomes for the firm and its stakeholders;
(3) the interests of all (legitimate) stakeholders have intrinsic value, and no set of
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interests is assumed to dominate the others (Clarkson, 1995; Donaldson and

Preston, 1995); and
(4) the theory focuses on managerial decision making (Donaldson and Preston, 1995).
Donaldson and Preston (1995) outline three types of stakeholder theory: descriptive,
instrumental, and normative. The descriptive stakeholder theory is also known as
the empirical theory. It tries “to describe, and sometimes to explain, specific corporate
characteristics and behaviors” (Donaldson and Preston, 1995, p. 70). The instrumental
stakeholder theory, which is also known as the strategic stakeholder theory (Wall and
Greiling, 2011), assumes that the main problem with the company’s stakeholders is a lack
of trust and cooperation ( Jones, 1995). Managing relationships with the stakeholders
is a strategy to resolve this problem. The instrumental stakeholder approach suggests
that stakeholder management impacts on the achievement of corporate conventional
performance (Donaldson and Preston, 1995). The firm will gain a competitive advantage
if it is able to develop relationships with its stakeholders based on mutual trust and
cooperation ( Jones, 1995). Therefore, information about the social and environmental
stakeholders will be used to create strategies for achieving this competitive advantage.
Another type of stakeholder theory is the normative stakeholder theory. This theory is
“used to interpret the function of the corporation, including the identification
of moral or philosophical guidelines for the operation and management of corporations”
(Donaldson and Preston, 1995, p. 71). It addresses morals and values explicitly as a central
feature of managing organisations (Phillips et al., 2003).
Jones and Wicks (1999), however, propose a convergent stakeholder theory. It contains
a normative component and an instrumental component. They contend that “convergent
stakeholder theory is a new way of theorizing about organizations and is, therefore,
potentially transformational – not just for scholars but for managers as well” (p. 218).
Particular to a firm’s approach to the natural environment, Henriques and
Sadorsky (1999) classified firms into four categories: reactive, defensive, accommodative, and
proactive. Reactive firms are firms whose top management do not support environmental
management, as they think environment management is not necessary. Consequently,
the firms do not conduct environmental training for their employees and do not provide
an environment report. Defensive firms deal with environmental issues when necessary, with
the piecemeal involvement of top management to satisfy environmental regulations
with little employee environmental training and involvement. Accommodative firms
view environmental management as a worthwhile function, and provide some employee
 ARA environmental training and involvement. Their focus, however, is internal reporting with
23,2 some involvement by top management. Proactive firms see environmental management
as an important business function and emphasise both internal and external reporting. Top
management as well as employees support, and are involved in, environmental
issues and training. Further, Henriques and Sadorsky (1999) contend that related to the
environment, there are four critical stakeholders: regulatory stakeholders (e.g. government,
160 trade associations), organisational stakeholders (e.g. customers, suppliers, employees,
shareholders), community stakeholders (e.g. community groups, environmental
organisations, and other potential lobbies), and the media.

Hypothesis formulation
The stakeholder theory is a theory of organisational management and ethics (Phillips
et al., 2003). Therefore, the stakeholder theory explains management decisions based on
the organisational management principles and values, especially in decision making
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involving many stakeholders. The convergent stakeholder theory represents those

organisational management principles and values.
One of the factors that influences the use of information to develop knowledge about
the work environment is the diversity of information (Hall, 2010). Good or bad social and
environmental information will give more knowledge about the external and social
effects of managers’ decisions, so managers would make better decisions (Grit, 2004).
Hall (2010) explains that the accounting information is important information for managers
in managing company projects. Social and environmental information, as feedback
information, will be used to adjust managers’ strategies (Henri and Journeault, 2010).
Bad environmental and social information could cause managers to alter their original
decision, and lead to cancellation of the project. On the contrary, good information will
encourage managers to continue the project. Based on the instrumental approach of
stakeholder theory, managers try to improve economic performance by considering that
information, because social responsibility performance can improve economic performance
through the development of the company’s intangible resources such as innovation,
reputation, culture, and human capital (Surroca et al., 2010). Henri and Journeault (2010)
also explain that good social and environmental performance can reduce the long-term risk
from reduced resources, energy fluctuations, product liability, compliance costs, and
improve the corporate image which will contribute to economic performance.
Based on the convergent stakeholder theory, managers use social and environmental
information to keep their contract with social and environmental parties. The managers’
task is to maintain the stakeholders’ support through balancing their interests (Freeman
and Phillips, 2002). By considering information concerning managerial actions and
environmental issues, managers can improve contracting, and ultimately, economic
performance (Henri and Journeault, 2010). Additionally, managers will consider social
and environmental information because the interests of stakeholders are of intrinsic value
and each group of stakeholders merits consideration (Donaldson and Preston, 1995).
Therefore, the following hypotheses are stated:
H1a. Managers who are provided with bad economic information and good social
and environmental information are more likely to continue the project than
managers who are provided with only bad economic information.
H2a. Managers who are provided with good economic information and bad social
and environmental information are more likely not to continue the project than
managers who are provided with only good economic information.
 Research method Information
To test the hypotheses, a laboratory experiment was conducted. A total of 50 subjects on managers’
participated in the experiment, but one of them did not pass the manipulation check[2].
The subjects were undergraduate students at a major university in Indonesia. We use
decisions
students as our subjects because a study by Liyanarachchi and Milne (2005) found
no difference in investment decisions between accounting practitioners and students,
when they are provided with environmental information/issues. 161
To ascertain that all the subjects involved understood the case, the experiment
required that they were all accounting students and had taken either management
accounting or a financial management course. There were 16 men (33 per cent) and
33 women (67 per cent) participated in the experiment[3]. As the subjects were
volunteers they were offered some incentives to increase their motivation to complete
the task. They were told at the beginning of the experiment that they would get a token
of appreciation, in the form of stationery, and on completion of the experiment their
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names would be entered in a draw for door prizes worth IDR45,000-IDR57,000.

All participants were given information about the economic performance, but only
the experimental group were informed about the social and environmental
performance. This social and environmental performance was presented in the form
of good and bad performance. We had four groups of participants: Group A were those
who received only good economic information, Group B were those who received both
good economic information and bad social and social environment, Group C were those
who received only bad economic information, and Group D were those who received
both bad economic information and good social and environmental information.

The experiment procedure and case material

In our experimental task, all participants were given instructions to act as the
investment manager of a company. Four years ago, the company invested in a project
worth IDR10,000,000,000 (around US$1,000,000) with an estimated seven-year life.
Now, the participants, as the investment manager, had to decide whether the project
should be continued or discontinued, due to the existence of information about the
social and environmental performance of the project.
The subjects were required to decide whether to continue or discontinue the
project on a ten-point scale that has been used in similar prior experiments (Harrison
and Harrell, 1993; Booth and Schulz, 2004; Rutledge and Karim, 1999; Chong
and Suryawati, 2010). The scale was divided at its midpoint (between 5 and 6)
and labelled so that a choice of 1-5 indicated a continuance decision and a choice of
6-10 indicated a discontinuance decision. The end points were anchored for “definitely”
continue or discontinue. Thus, the larger the numerical response indicated by a subject,
the greater the tendency to terminate the project. We used this response as the
dependent variable.
The independent variable was the social and environmental information.
This information about the environmental performance was developed from
Chan and Milne (1999) which contained information about the environmental
pollution and compliance with environmental regulations. This information was presented
in the bad and good forms. In the bad form, it is said that the project was executed without
complying with the environmental rules in force, and caused pollution to the surrounding
water, soil, and air. In its good form, the information explained that the project was
executed in accordance with the rules at that time, and efforts had been made to reduce the
pollution caused by the project.
 ARA The social performance information presented was developed from Teoh and Shiu
23,2 (1990) which contained information about occupational health and safety and
communities. This information was also presented in the bad and good forms. In the
bad form, the information indicated that since the start of the project, no effort had been
made to ensure occupational health and safety, so many health and safety problems
arose. Regarding the communities affected by the project, information showed that the
162 project had not involved itself in community activities, so that local people complained
about the existence of the project. In its good form, the information told the subjects
that the project had tried to prevent and solve the health and safety problems that
arose, and the community supported the existence of the project.
We selected Chan and Milne (1999) and Teoh and Shiu’s (1990) instruments so that
we were able to provide a positive treatment using the good form of the instrument, and
a negative treatment using the bad form of the instrument. One may argue that people’s
perception of social and environmental performance information has changed
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compared to that held in the 1990s. However, information related to health, safety,
community, pollution, and compliance with government regulations, as covered in the
instruments, is still considered important, especially for businesses that wish to be
considered as ethical (see, e.g. Velasquez, 2012).

Data analysis and results

Statistical tests
Analysis of variance (ANOVA) using planned comparison through contrast analysis
techniques (Kerlinger and Lee, 2000) was conducted to test the hypotheses. Analysis
was performed by comparing the control group with the experimental group. This test
aimed to determine whether there was a statistically significant tendency that
managers who are provided with bad (good) economic information and good (bad)
social and environmental information are more likely (not) to continue the project rather
than managers who are provided with only bad (good) economic information. ANOVA
use is justified as the dependent variable data shows that there is a reasonably straight
line based on the normal Q-Q plot, suggesting that the distribution is normal (Pallant,
2011). In addition, The Levene’s test of equality of error variances shows that it is not
significant at the 0.05 level ( p ¼ 0.149).

Descriptive statistics
Table I shows the number of participants (n), the mean (Ȳ), and standard deviation
(SD) (σY) for each group. The table shows that the numbers of participants in each
group are: 13 (Group A), 12 (Group B), 11 (Group C), and 13 (Group D). Additionally, the
table shows that the mean of the experimental group who received both good economic
information and bad social and social environment (Group B) is higher than that of the
control group who received only good economic information (Group A), i.e. 6.25
(SD ¼ 2.18) for Group B and 3.78 (SD ¼ 2.74) for Group A. Further, the table indicates
that the mean of the experimental group who received both bad economic information
and good social and environmental information (Group D) is lower than that of the
control group who received only bad economic information (Group C), i.e. 3.61
(SD ¼ 1.89) for Group D and 6.91 (SD ¼ 1.87) for Group C. Overall, the table shows
that the highest mean belongs to Group C and the lowest one belongs to Group D.
The results indicate that subjects may consider social and environmental information
more important than economic information.
 Economic information
Information
Social and environmental information Good Bad on managers’
decisions
Present Good n/a Group D
n ¼ 13
Ȳ ¼ 3.61
σY ¼ 1.89
Bad Group B n/a 163
n ¼ 12
Ȳ ¼ 6.25
σY ¼ 2.18
Absent Group A Group C
n ¼ 13 n ¼ 11
Ȳ ¼ 3.78 Ȳ ¼ 6.91 Table I.
σY ¼ 2.74 σY ¼ 1.87 Descriptive statistics
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Hypothesis testing
Table II panel A shows the results of ANOVA for hypothesis testing. These results
indicate a significant difference (p-valueo0.05) among all the groups formed in the
experiment. To test the hypotheses, further analysis of the differences in specific groups
is needed because the hypotheses implies the necessity of doing planned comparisons
between certain groups. Planned comparisons were conducted using contrast analysis.
The hypotheses predict that managers who are provided bad (good) economic
information and good (bad) social and environmental information are more likely (not)
to continue the company’s project rather than managers who are provided with only bad
(good) economic information. As indicated in Table I, the mean of the experimental group
who gets both good economic information and bad social and environmental information
(Group B) is higher than the control group who get only good economic information
(Group A). Table II panel B shows the mean distance of the two groups (2.48) and confirms
the statistically significant difference ( p-valueo0.05). Furthermore, as also indicated in
Table I, the mean of the experimental group who get both bad economic information, and
good social and environmental information (Group D) is lower than the control group who
get only bad economic information (Group C). Table II panel B also shows the mean
distance of the two groups (3.29) and confirms the statistically significant difference
( p-valueo0.05). This is also illustrated by Figure 1.
The results show that social and environment information may affect managers’
decisions. In particular, our findings suggest that although project managers experience
economic benefits (good economic performance), if they see bad effects of the project on

Panel A
Sum of squares df Mean square F Sig
Between groups 103.375 3 34.458 7.095 0.001
Within groups 218.544 45 4.857
Total 321.918 48
Panel B
Contrast Value of contrast SE t df Sig Table II.
Group A vs Group B 2.4808 0.88221 2.812 45 0.014 ANOVA and
Group C vs Group D 3.2937 0.90282 −3.648 45 0.002 contrast analysis
 ARA 7.0
23,2

Mean of Managers’ Decision

6.0

164
5.0

4.0
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3.0

A B C D
Information
Figure 1. Notes: Information: A, good economic information;
Mean of B, good economic information and bad social and environmental
managers’ project
evaluation decision information; C, bad economic information; D, bad economic
information and good social and environmental information

society and environment (because they are provided with bad society and environment
information), they will discontinue the project. In other words, H1 which states managers
who are provided with bad economic information and good social and environmental
information are more likely to continue the project than managers who are provided with
only bad economic information is supported. Additionally, H2 which states managers
who are provided with good economic information and bad social and environmental
information are more likely not to continue the project than managers who are provided
with only good economic information is also supported.
As previously mentioned, a meta-analysis by Borkowski and Ugras (1998) found that
female business students exhibit stronger ethical attitudes compared to male students.
As considering various stakeholders, including social and environment, can be seen as
an ethical attitude, following Chang and Yen (2007) we performed a sensitivity test using
ANCOVA with gender as the covariate to examine if gender affected the results. The
results (see Table III) show that after controlling the influence of gender, our hypotheses
are still confirmed.

Discussion and conclusions

The objective of this study is to examine the use of social and environmental
information in managers’ decision making. Based on the stakeholder theory, this
study hypothesises that the manager, as the internal party, will consider social and
environmental information when that information is present in the manager’s decision-
making processes. Using an experimental method with 49 students as the subjects,
the hypotheses are supported by the results.
The study finds a significant difference between the groups who receive economic,
social, and environmental information and the groups who receive only economic
information. The mean of the experimental group who were provided with both good
 Panel A
Information
Sum of squares df Mean square F Sig. on managers’
Corrected model 104.402 4 26.100 5.280 0.001 decisions
Intercept 112.760 1 112.760 22.810 0.000
Gender 1.027 1 1.027 0.208 0.651
Information 103.891 3 34.630 7.005 0.001
Error 217.517 44 4.944 165
Total 1,567.000 49
Corrected total 321.918 48
Panel B
Contrast Value of contrast SE Sig. Table III.
Group A vs Group B 2.523 0.895 0.014 ANCOVA and
Group C vs Group D 3.276 0.912 0.002 contrast analysis
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economic information and bad social and environmental information was higher than
the control group who were provided with only good economic information. In contrast,
that of the experimental group who were provided with both bad economic information
and good social and environmental information was lower than the control group who
were provided with only bad economic information. Therefore, the hypotheses are
supported by our data. Further, we analysed if our results are affected by gender of our
participants. The results, however, show no significant effect of gender on managers’
decisions. Hence, it can be concluded that in our study gender does not matter.
Additionally, this study provides empirical evidence of how managers make
decisions in cases involving many stakeholders. This study also provides empirical
evidence that has not been included in previous studies on how the internal party, the
manager, uses social and environmental information. Currently empirical evidence only
shows how the external parties use social and environmental information.
The main implication of this study is the need for management accountants to
provide social and environmental information for the managers’ decision-making
processes. As predicted, when the manager gets social and environmental information,
they take that information into consideration in their decision making. Currently, social
and environmental information has not been integrated into the information presented
by the management accountants, so that the best management information systems are
inefficient, and at worst they lead to poor decision making and lax accountability
(Schaltegger et al., 2006).
The provision of social and environment information will have good impacts. Demski
and Feltham (1976) explain that the accounting information, in this case the social and
environmental information, influences managerial decision making in two ways: directly
as an input to the decision and indirectly as an influence on the managers’ behaviour.
Our findings indicate that the social and environmental information may be a source
of information as well to alter the managers’ behaviour to become more socially
responsible. Of the instrumental approach, this will improve the company’s financial
performance because corporate social performance improves economic performance
as stated by Surroca et al. (2010) and Simpson and Kohers (2002). Therefore, the provision
of social and environmental information by accountants can be encouraged to improve
corporate performance.
Results and implications, however, should be understood in the context of the
inherent limitations of this study. A limitation of this study is related to the use of social
 ARA and environmental information in qualitative form. Qualitative information has
23,2 disadvantages in terms of its ability to be compared. Another limitation is that this
study does not consider the individual characteristics of the decision maker. Future
studies may overcome the limitations of this study. For example, a future study
may conduct experiments using different cases. Additionally, future research may use
a different research approach, such as using the survey method.
166
Notes
1. Since agency theory only focuses on the contractual relationship between managers and
stockholders, the theory does not explain contractual relationships between managers and other
stakeholders. Implicit contractual is “informal agreements supported by reputation rather than
law” (Baker et al., 1997).
2. This subject did not pass the manipulation check because he did not demonstrate a good
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comprehension for bad social and environment information (treatment).

3. A meta-analysis by Borkowski and Ugras (1998) found that female business students exhibit
stronger ethical attitudes compared to male students. To examine if there was a gender effect,
following Chang and Yen (2007), we performed a sensitivity test using ANCOVA with gender
as the covariate. This will be discussed in the “Hypothesis testing” section.

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About the authors

Afdal Madein is a Lecturer at the Accounting Department, Fajar University, Makassar Indonesia.
He did his Master’s Degree at the Gadjah Mada University, Indonesia. His research interests are
social and environmental accounting and management accounting. He has published his work
in The Indonesian Journal of Accounting Research.
Mahfud Sholihin is an Associate Professor at the Accounting Department, Faculty of Economics
and Business, Gadjah Mada University. He earned his PhD from the Bradford University, UK.
His research interests are management accounting, behavioural accounting, social and
environmental accounting, and business and accounting professional ethics. Some of his works
have been published in British Accounting Review, Accounting and Business Research, Financial
Accountability and Management Journal, Journal of Applied Accounting Research, Journal of Applied
Management Accounting Research, and Asian Journal of Business Ethics. Mahfud Sholihin is the
corresponding author and can be contacted at: mahfud@ugm.ac.id

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