Stakeholder Engagement in Mandatory Non-Financial Reporting: First Results for First-Time Reporters in Italy

Abstract

This study aims to analyze the issue of Stakeholder Engagement (SE) in mandatory non-financial reporting (NFR) in Italy, also as element supporting the quality of non-financial disclosure. In particular, following previous research that demonstrated critical aspects with regard to this issue in the first reporting period (2017 fiscal year), this paper explores whether and how an activity of SE has been performed and disclosed by first-time reporters in the second year of the application of the law. A SE Score is proposed to assess the level of SE disclosed by Italian companies that, before the transposition of the European Directive 2014/95/EU, did not communicate voluntarily non-financial information. In addition, the effect of board characteristics and strategic posture on the level of SE disclosed is examined. The study shows that the level of SE is positively affected by board independence and active strategic posture (represented by social and environmental certifications), while board size is negative related to the result of the SE Score. To the best of authors knowledge, this is the first research that explores in depth the issue of SE in mandatory NFR in the Italian context, testing the impact of possible determinants. This study provides some insights for companies and policy makers and extends previous literature on both SE and mandatory NFR.