Mandatory Non-Financial Information Disclosure under European Directive 95/2014/EU: Evidence from Portuguese Listed Companies

Abstract

This paper investigates the effects of Directive 95/2014/EU on the quality of non-financial information (NFI) disclosed by Portuguese listed companies and explains the reporting practices adopted in this context. For this purpose, a content analysis of non-financial disclosures made a year before (2016) and in the first and second years of the implementation of the Directive (2017 and 2018) was performed. A self-constructed index that covers the disclosure matters required by the Directive was used to measure the quality of NFI. The findings showed that the major effects on the quality of non-financial disclosures were observed in the first year of implementation. Furthermore, it was observed that companies that had high-quality voluntary reporting practices, such as the presentation of a sustainability report, the use of GRI Standards and the certification of NFI, maintained these practices after the Directive. After two years of implementation, there were still companies that did not mention the framework used or did not disclose information on sensitive matters such as human rights or anti-corruption and bribery. The evidence found supports the existence of a ‘routine’ effect that has influenced the reporting practices adopted. The results obtained have implications for policymakers helping them to identify aspects of the Directive’s requirements that need to be improved.