Saying More than Necessary: When and Why Corporates Disclose More than Required

Abstract

Firms located in mandatory disclosure regimes face a choice of disclosing only what is mandated or voluntarily disclose additional information. In this paper, we investigate why companies choose to disclose information voluntarily, over and above what is mandated by regulatory authorities and whether this dual approach to disclosure actually translates to better disclosure quality. Our findings from analysing data from Bombay Stock Exchange’s Top 100 firms suggest that firms pursue a portfolio approach with respect to voluntary disclosure. That is, firms who voluntarily commit to multination agreements on sustainable business practices like the UNGC are also more likely to pursue local voluntary sustainable standards above legal requirements. Moreover, we also find that additional voluntary sustainability reporting according to GRI guidelines within a mandatory disclosure environment enhances the overall quality of disclosure. Further examination of firm-level contingencies of this relationship indicates that a firm’s level of product diversification positively moderates the relationship between additional voluntary sustainability reporting and the firm’s overall quality of disclosure.