The Role of Sustainability Reporting in Reducing Information Asymmetry: The Case of Family- and Non-Family-Controlled Firms

Abstract

This study aims to examine the link between sustainability reporting and information asymmetry in family- and non-family-controlled firms for a sample of 641 UK firms listed in the FTSE all-share index during the period 2010–2017. The findings show a negative and significant relationship between sustainability reporting and IA. The results also show that the sustainability reporting–information asymmetry nexus is weaker in family-controlled firms. The findings of this study should improve our understanding of sustainability reporting motivations, particularly in companies that are controlled by families. Moreover, an explanation of the role of family-controlled firms in mitigating or exacerbating this relationship will surely help the British regulators improve corporate governance rules related to various ownership structures. For policy makers, it is important to confirm that sustainability reporting is representative of actual corporate activities and is not only used to mislead stakeholders.