Non‐financial disclosure and information asymmetry: A stakeholder view on US listed firms

Abstract

The purpose of this paper is to test whether the structure of non-financial disclosure, defined as the diffusion of financial, social and environmental information as part of the dialogue between a firm and its stakeholders, reduce information asymmetry. We adopt a stakeholder view of the firm to analyze the structure of non-financial disclosure along three dimensions: non-financial disclosure depth, breadth and concentration. To operationalize the variables, we applied content analysis technique to non-financial reports released by U.S. firms included in S&P500 index over the period 2004-2014. We combined content data and Bid-Ask spread data to test our hypotheses relying on feasible least squared (FLGS) estimation method. Results show that both the level of non-financial disclosure and the breadth of stakeholder-related themes covered in the reports reduce information asymmetry. In addition, firms that are consistent in how information is distributed across the different stakeholder categories benefit from lower opacity and reduced information asymmetry. Our findings contribute to the debate on the need to move beyond a one-fits-all approach to the study of nonfinancial disclosure and its related impacts.

CEO characteristics and environmental disclosure of listed firms in an emerging economy: Does sustainability reporting format matter?

“…Likewise, we also see that dissemination of environmental performance is influenced by normative, mimetic, and coercive pressures (Cubilla‐Montilla et al, 2020). An increase in environmental disclosure addresses the information asymmetry problem that stakeholders face (Romito & Vurro, 2020). Nonetheless, stakeholders, whether primary or secondary, still requires information for decision making (Clarkson, 1995; Freeman, 1984; Mishra & Suar, 2010).…”

“…However, there is little information on the sustainability report format and CEO concerning environmental disclosure. The CEO's influence is needed when stakeholder and institutional theory seek to reduce information asymmetry problems (Romito & Vurro, 2020) on environmental performance and disclosure (Cubilla‐Montilla et al, 2020). Therefore, this study examines CEO characteristics, choice of sustainability reporting format, and environmental disclosures of listed firms in India, using institutional and stakeholder theory to interpret the relationships.…”

The future ofnon‐financialbusinesses reporting: Learning from the Covid‐19 pandemic

“…It is evident in the literature that when a company cares towards society it creates a long‐lasting social identity which generates brand loyalty associated with long term profits (García‐Sánchez, Hussain, et al, 2019; García‐Sánchez, Martínez‐Ferrero, et al, 2019; García‐Sánchez & Noguera‐Gámez, 2017; He et al, 2012; Hou, 2019; Khatib et al, 2021; Martínez‐Ferrero et al, 2015; McLaughlin et al, 2019; Mio et al, 2020; Muserra et al, 2020; Pistoni et al, 2018; Roberts et al, 2021; Romito & Vurro, 2021). It is observed that these socially accountable businesses managed to survive the Covid‐19 crisis.…”

Disclosure of gender policies: do they affect business performance?

“…The application of this directive has opened a debate on whether or not companies do in fact comply with it and what the objective of this compliance is ( Caputo and Pizzi, 2019 ; Dumay et al., 2019 ). In addition, several investigations have shown the importance of disclosing non-financial information for companies, not only due to complying with this directive, but also as a sign of a commitment to society ( Navarro et al., 2010 ; Gamerschlag et al., 2011 ; Dhaliwal et al., 2012 ; Miralles-Quirós et al., 2021 ) and as a mechanism to reduce information asymmetries that occur in markets (Signal Theory) ( Cheng et al., 2014 ; Saitua, 2015 ; Romito and Vurro, 2021 ). Disclosure helps the investor to understand the management of the company and know how these policies can affect their investments ( Gershoni and Low, 2021 ; Martín et al., 2019 ).…”