Association between Firm Value and Sustainability Reporting During Disclosure Regime Change: Case of Singapore Publicly Listed Firms

Abstract

This study aims to explore an existing gap in the sustainability disclosure/firm value literature by examining the association between the annual change in the magnitude and extent of sustainability disclosure and the annual change in firm value during the transition from a voluntary to mandated ‘comply or explain’ disclosure regime. Analysis presented is based on a sample of 436 listed Singapore firm across a four-year observation period (i.e., October 1, 2014 to September 30, 2018) that provided an overall pooled-sample of 1,744 firm-year observations and 1,308 changes in firm-year observations. The observation window gives rise to four distinctive periods of sustainability disclosure: (1) reporting under a voluntary regime; (2) reporting when consultation on shift to mandated regime commented; (3) reporting when shift to mandated reporting confirmed but not yet effective; and (4) period immediately following enforcement of mandated requirements. Empirical findings indicate a positive and significant sustainability disclosure/firm value linkage during the period when sustainability disclosures were voluntary. The significance of this association declines, ultimately becoming insignificant, as the transition to a mandated disclosure regime nears. A positive and significant association is found between the change in the magnitude of sustainability disclosure and the change in firm value in the initial period of transition. However, this association is insignificant between the periods immediate before and after mandated ‘comply or explain’ requirements became enforced. The association between the change in extent of sustainability disclosure and change in firm value is insignificant across between annual period within, and for the overall observation window.