Sustainability-related disclosure rules and financial market indicators: Searching for interconnections in developed and developing countries

Abstract

In today’s fast-paced business environment, integrating sustainability into financial decision-making has been a key driver of change. As stakeholders increasingly demand greater corporate transparency and accountability, regulatory bodies have stepped in to ensure that sustainability reporting is standardized and robust. This paper aims to establish the relationship between the sustainability-related disclosure rules and the dynamic indicators of the financial market. The object of the study is 74 countries of the world, which are grouped into developed and developing countries. The time period is 2021, for the stock market capitalization indicators – 2020, as the most recent years with available data. The research methods are normality tests (Shapiro-Wilk and Shapiro-Francia test), comparison methods (Student’s t-test and Mann-Whitney U test, regression analysis with dummy variables), linear and non-linear correlation and regression analysis (logarithmic, polynomial). The results obtained confirmed that the sustainability-related disclosure rules are higher in developed countries than in developing ones. At the same time, in developed countries, the growth of such requirements affects the increase in stock price volatility, stock market capitalization, foreign direct and portfolio investments. For developing countries, there is also an increase in the stock market capitalization, portfolio investments and the volume of stock trading. Recognizing these trends can benefit both financial market regulators and participants to encourage the formation of a transparent and efficient financial market, thereby mitigating the problems associated with information asymmetry.