The Impact of Human Rights Reporting and Presentation Formats on Non-Professional Investors’ Perceptions and Intentions to Invest

William D Brink,Tim V Eaton,Karen De Meyst

doi:10.3390/su14042403

William D Brink, Tim V Eaton + Show 1 more

Open Access

https://doi.org/10.3390/su14042403

Copy DOI

Journal: Sustainability	Publication Date: Feb 19, 2022
Citations: 2	License type: CC BY 4.0

Affiliation: Miami University, Radboud University Nijmegen

Abstract

Compared to other types of sustainability information, it remains uncommon for companies to report human rights information, and critics argue that when companies do report, they often report opportunistically. This is problematic as non-professional investors may rely on this information when making investment decisions. In this study, we use an experiment to examine how non-professional investors react to human rights information presented in varying formats (i.e., numerical, graphs, qualitative) compared to no reporting. Consistent with our expectations, we find that when information is positive, participants do not react to qualitative information. However, they react positively to numerical and graphical information and seem to use a less critical mindset when processing this type of information, which is associated in the literature with an “aura” of accuracy, objectivity, and neutrality. This is problematic because, similar to what is often the case in reality, participants had no certainty about the accuracy of the information. Further, when information is less positive, participants do not react to numerical or graphical information, but they do react negatively to qualitative information, which is more vague and may be perceived as companies trying to obfuscate less positive performance. We offer a critical discussion of our results.

Highlights

Sustainability reporting has grown dramatically over the past several years and is increasingly becoming standard practice for companies across the world [1,2,3,4,5,6]
Whereas the growing academic literature on sustainability reporting has shown that sustainability reporting can potentially lead to important advantages for companies, few of these studies provide empirical evidence on human rights reporting
We further explore how non-professional investors may react to human rights reporting, and we formulate our theoretical expectations

Summary

Introduction

Sustainability reporting has grown dramatically over the past several years and is increasingly becoming standard practice for companies across the world [1,2,3,4,5,6]. Whereas the growing academic literature on sustainability reporting has shown that sustainability reporting can potentially lead to important advantages for companies (advantages of sustainability reporting identified in the literature include overall lower cost of equity capital [3], higher market returns [12], higher firm value [13,14], lower incidents of discretionary accounting accruals, earnings management, and Securities and Exchange Commission investigations, and greater forecast accuracy for analysts [15]), few of these studies provide empirical evidence on human rights reporting. A universally accepted interpretation of human rights is provided in the Universal Declaration of Human Rights, which was proclaimed and adopted by the United Nations General Assembly in 1948 [25]. This declaration constitutes rights such as the right to life, freedom from torture, and freedom of thought. Examples are the right to work, the abolition of child labor, freedom from slavery, the right to equality at work, the right to just and favorable remuneration, and the right to a safe work environment [25]

Methods

Results

Conclusion