Abstract
Even though literature studying the determinants of non-financial disclosure (NFD) is pervasive, Latin America has been overlooked in this tradition. In this sense, scholars have not evidenced which factors compel companies in this context to report this information despite its voluntary nature. Drawing on Stakeholder Theory as a basis, we derive eight possible antecedents of NFD from extant literature and test them in a sample of 643 Latin American firms for a 10 year span (2006–2015). Using a logit panel model, our evidence indicates that firm size, market-to-book ratio, systematic risk, and industry membership are factors that pressure companies to report. However, contrary to our conceptual development we find that profitability and regulatory quality inversely affects NFD. This leads us to posit that Latin America is unique in terms of reporting because agency costs may arise when disclosing data and also that feeble regulations could summon firms to fill this void through NFD. We thus contribute to this strand by revealing that stakeholders in this milieu are essentially different than in developed countries, and therefore the underlying reasons to engage in NFD also differ.
Highlights
The strand studying the determinants of non-financial disclosure (NFD) has greatly evolved in the past decades [1,2,3]
Consistent with our theoretical development, results show that firm size, market-to-book ratio (MBR), Beta, and industry membership are NFD determinants in LatAm, whereas leverage and degree of internationalization have no influence whatsoever. (Because our evidence suggests that leverage and degree of internationalization have no impact on NFD in Latin American companies, we deliberately do not address these variables in the discussion section of our article)
From a conceptual standpoint this confirms our assertions that stakeholders in LatAm affect companies differently in comparison to developed settings; as such, we are able to make a valuable contribution to the discipline from the viewpoint of Stakeholder Theory
Summary
The strand studying the determinants of non-financial disclosure (NFD) has greatly evolved in the past decades [1,2,3]. From a managerial stance, it seems a first step to better firms’ ESG performance [9], given that executives can use this information to assess the entity’s impact [10] and as a basis for stakeholder dialogue to subsequently reduce adverse outcomes [11,12,13] In this sense, according to Manes-Rossi et al [8] it could represent a way of showing that firm operations are within societal boundaries, and that their activities are legitimate. Scholars can gain insight into this complex decision-making process and how it shifts in time and across different contexts [2,16] These points reflect the multifaceted importance of NFD, justifying the urgency to delve into its determinants (for a list of secondary reasons, see Kolk [17])
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