Corporate Disclosure Research Articles

CEO Connectedness and Firm Transparency

ABSTRACTOur research reveals that CEO connections with Audit Committee directors, established through past employment, education, or social organization memberships, significantly impact firm transparency. These connections increase the likelihood of firms issuing less transparent and readable financial reports. Furthermore, these connections are linked to decreased long‐term firm value and increased crash risk. Our findings underscore the crucial role of CEO connectedness in corporate disclosure transparency and firm value. We employed multiple methodologies to address endogeneity concerns. Our results remain robust.

Technology rhetoric and institutional ownership

Abstract This article compares actual R&D spend with the managerial rhetoric around technology and innovation contained within corporate disclosures of US-listed firms. We find that, whilst actual R&D spend and patents do not entice institutional investors to increase their stock holdings, firms that espouse technology and innovation in their corporate disclosures are quite successful in drawing in short-term investors. We frame this investor behaviour within the economics of expectation literature. While managers are incentivised to draw in capital, short-horizon investors are less likely to exert due diligence and are rather persuaded by a technology narrative—that is, a ‘gold rush’ effect. This explains our finding that when there is a sudden downturn with stock price crashes, short-term investors rush to withdraw their money from firms that ‘talk tech’. Our findings have implications for managerial rewards systems, especially when these encourage managerial hype.

A review of ex ante and ex post materiality measures, and consequences and determinants of material disclosures in sustainability reporting

PurposeThe purpose of the review is to synthesize the research on materiality measures of sustainability reporting and highlight how preparers, users, auditors, regulators and other stakeholders assess or determine the materiality in sustainability reporting. The review further summarizes the findings on consequences and determinants of material disclosures in sustainability reporting. Several directions for future research are also discussed.Design/methodology/approachThis study provides a systematic review of materiality measures developed in the context of sustainability reporting. This synthesis of the literature summarizes the existing methodologies of measuring materiality. It also evaluates the strength and limitations of existing methods and approaches of measuring materiality in sustainability disclosures.FindingsWe find that the ex post materiality measures are simplistic and unidirectional in nature and ex ante materiality measures lack external validity and are generally narrow in focus – for example, focused on single firms or industries. Another major limitation in the current literature is the absence of robust empirical investigation of double materiality in sustainability reporting and a vast majority of the measures are developed without stakeholder engagement. Lastly, we document that the findings on determinants of material disclosure are fragmented and inconclusive and that the literature on consequences of material disclosure is rather un-explored.Originality/valueThe study explains the connections and differences between the various materiality measures. We document that materiality is measured in two distinct ways, ex ante and ex post and often times without stakeholder engagement. Moreover, given that a vast majority of the measures rely on manual content analysis, we find that they suffer from reproducibility and scalability.

Governance of social attributes behind ESG concepts in business entities: an empirical evidence based on the benchmarking approach

This study examines the integration of social attributes in business entities through an empirical benchmarking approach, emphasizing the impact of labor force management on the competitiveness and sustainability of business activities. The paper discusses the economic implications of human resources management in meeting both qualitative and quantitative workforce requirements, highlighting the necessity of aligning labor costs with broader economic and social sustainability objectives. Additionally, the study explores the regulatory and voluntary frameworks influencing corporate disclosures on social and environmental impacts, particularly within the European context under the new Corporate Sustainability Reporting Directive (CSRD).

3-Dimensional Printing in Healthcare: Manufacturing Techniques and Applications

3D printing and additive manufacturing are interchangeable terms. Additive manufacturing builds models layer by layer using a variety of laser-based or sophisticated printing processes. While this was one of the earliest techniques for 3D printing, the field now widely uses a number of other patented methods. The objective is to analyze the success rate of 3D printing in healthcare. The medical industry has found 3D printing to be highly beneficial in recent years. The application of 3D printing technology allows for greater customization of the therapeutic process, which enhances treatment safety, accuracy, and precision. On the other hand, the disclosure of new materials for 3D printing occurs frequently. For some producers, the right materials might just be a few months or years away. However, printing certain materials may be difficult or impossible. Excellent results are not always possible with 3D printers. We can conclude that 3D printing represents one of the most advanced techniques in healthcare.

Picture Content in Annual Reports Matters: Framing as a Strategy for Impressing Potential Investors

This study examines the association between a firm's economic situation and the use of pictorial content in its annual reports. In other words, we shed light on whether firms in a specific economic situation intentionally choose particular picture content for the illustrations in their annual reports. We argue that the content of pictures can be used as an additional disclosure instrument to highlight signals beyond objective financial data, that is, an attempt to moderate readers’ decision‐making processes. Corporate disclosure can be designed at multiple levels of corporate communication to influence addressees’ perceptions. We analyse 4770 annual reports from FTSE‐350 firms between 2000 and 2021 using Google Vision API's artificial intelligence to examine if this special form of corporate disclosure is affected by corporate economic performance. Our findings suggest that decisions about pictorial elements in annual reports are associated with firms’ economic situation. Our paper contributes to the integration of communication theory, behavioural finance and voluntary disclosure theory to comprehend the use of pictorial information in annual reports. This study broadens the rare evidence regarding information design choices in annual reports with a particular focus on picture usage. By acknowledging the interdependence between framing and voluntary disclosure, researchers and practitioners can refine communication strategies and interventions to promote honest and successful financial disclosure whilst also considering the various communication theory factors involved.

Ambiguity or specificity: The influence of merchant guild culture on managers' disclosure strategy

AbstractRecent studies indicate that culture attributes significantly influence corporate behaviour. Building on this, our study explores how merchant guild culture (MGC) influences firms' voluntary disclosure practices, specifically through managerial disclosure strategies. Analysing data from Chinese listed firms between 2010 and 2022, we found that MGC significantly reduces the specificity of managerial responses at earnings communication conferences (ECCs). This suggests that firms influenced by MGC favour ambiguous communication, aligning with the value to mitigate competitive risks. Our findings deepen the understanding of cultural influences on corporate disclosure practices and extend literature on the role of informal institutions in corporate behaviours.

GRI guidelines in developing countries: uncovering the antecedents and consequences

Purpose Framed under the upper echelons theory, the purpose of this paper is to examine the effect of board characteristics on the adoption of the global reporting initiative (GRI) guidelines for corporate disclosure and, consequently, their effect on the company’s market value. Design/methodology/approach To achieve the research objective, the authors investigated the impact of certain important board characteristics, such as board independence, size, gender diversity and director skills. The authors examined the adoption of GRI guidelines by 371 companies based in Latin America. Using logistic regression and panel data analysis, the authors tested five hypotheses. Findings The findings can confirm the upper echelons theory, showing that directors have an important role in determining environmental policies and strategies in their companies. The authors confirm that three characteristics affect GRI adoption in Latin America: independence, gender diversity and skills of board directors. The authors also found that companies that adhere to the GRI tend to perform better in terms of market capitalization. Practical implications Managers who want their organization to perform better in terms of GRI disclosure must understand that characteristics such as board independence, gender diversity and directors’ skills play a significant role in the company adopting the GRI for corporate disclosure. Furthermore, managers must be aware that by adopting the GRI, the company increases its market value through market capitalization. Originality/value The literature is still unaware of how the adoption of GRI can bring financial returns to organizations that adopt this type of standard to disclose their corporate reports. To the best of the authors’ knowledge, this is the first empirical paper to investigate the antecedents and consequences of GRI adoption in Latin America.

Do gender diversity and foreign investor affect sustainability disclosure

AbstractWe examine the effect of female board members and foreign institutional investors on corporate social responsibility (sustainability) disclosure in Indonesian listed firms from 2015 to 2017. Our final sample comprised 1192 firm‐year observations. We apply ordinary least squares pool regression to estimate the associations and address the endogeneity problem using the two‐stage least squares model, generalized method of moments, and lagged variables. While previous studies have focused on the impact of female board members and foreign institutional investors on financial outcomes, we extend the literature by investigating the association between both female board members and foreign investors and sustainable disclosure in Indonesia, where the participation of women is nominal, especially at the top management level, and the level of foreign ownership is high. Our findings propose a proportion of women as board members for listed firms and promote attractive policies to increase the number of foreign investors investing in Indonesia. It also contributes to conflicting results regarding the relationship between corporate governance and corporate social responsibility (CSR) commitment. Our results were robust after testing for endogeneity and adding more control variables. Overall, the findings have practical implications for policymakers and investors regarding corporate disclosure and governance in Indonesia.

Hidden neighbours: extracting industry momentum from stock networks

This paper introduces an innovative method for constructing industry momentum portfolios by leveraging two stock networks: one based on stock price correlations and the other on corporate text similarity. We find that these networks capture different aspects of company relationships, motivating us to combine them and form a portfolio that exploits less visible industry momentum. Our Hidden Neighbours portfolio, analysed from 2013 to 2022, delivered an annualised return of 18.16% with a Sharpe ratio of 0.85, outperforming the S&P 500 and other traditional momentum strategies. Factor decomposition attributes returns primarily to the idiosyncratic factor α\\documentclass[12pt]{minimal} \\usepackage{amsmath} \\usepackage{wasysym} \\usepackage{amsfonts} \\usepackage{amssymb} \\usepackage{amsbsy} \\usepackage{mathrsfs} \\usepackage{upgreek} \\setlength{\\oddsidemargin}{-69pt} \\begin{document}$$\\alpha$$\\end{document}. Our study employs interdisciplinary methods, merging network analysis and Natural Language Processing (NLP) techniques for portfolio construction. Utilising advanced text embedding models, we enhance portfolio construction by integrating textual insights from corporate disclosures into stock networks. The paper offers a comprehensive strategy across diverse data and the interdisciplinary approach, uniting financial theory, network science, and NLP, advances both theory and practice of portfolio management.

Managerial Self-References in Corporate Disclosures: An Analysis of MD&A

This study examines strategic pronoun usage in the Management Discussion and Analysis (MD&A) section of annual reports. Through automated textual analysis of a large sample of MD&As, we find that managers of firms with higher earnings growth tend to use more self-inclusive pronouns(e.g., “ we, ” “ us, ” and “ our ”) and fewer self-exclusive words (e.g., “the company ”). This self-referential language pattern is associated with a higher likelihood of future financial restatements. Our findings contribute to the literature on corporate narrative disclosures and identify a potential new indicator of financial misstatements. The results have implications for investors, analysts, auditors, and regulators.

EXPLORING THE EMERGING AREAS OF CORPORATE DISCLOSURES: A BIBLIOMETRIC ANALYSIS

In the current Indian scenario of the financial reporting regime, stakeholders are increasingly looking at the disclosure practices of the companies. Therefore, higher level of transparency is required which implies that there is need of higher level of disclosure. In the present era, the sources of information are not only restricted to annual reports for stakeholders to take decisions. Hence, it is very crucial to have encyclopaedic study on corporate disclosures. The main objective of this paper is to determine the current state of research on corporate disclosure practices across the world. In the present study, literature in subject areas business, management, accounting, economics, econometrics, and finance has been retrieved from Scopus Database and analysed for 15 years between 2009 & 2023. The bibliometric analysis has been conducted using VOS Viewer. This study highlights the trend of publication across two decades, countries and journals along with most cited papers, top journals, most influential authors. Finally, through co-occurrence analysis of keywords, least explored areas have been identified. This paper highlights the gap in the available literature and make recommendations for future research in emerging areas.

Contours of Time: archival revelations + spatial representation

On March 15 1899, the first passenger train departed London’s Marylebone Station for the city of Manchester. Sitting within a complex of communities – historic and contemporary, transient and permanent – Marylebone Station has always been as much, if not more, about the people who created, used, worked within, and lived near to it. Through its enduring presence, it has become a landmark offering a generous, but familiar, gateway into London for the wider railway network. As part of celebrations to mark the station’s 125th anniversary, an installation was designed and created for one entrance. This article explores the process and execution of research and design that were key to this commission. It considers how the consultation and disclosure of archival material can be revealed through the design, display and spatial arrangement of material; how the patina of the past is carried within the interior of a space and resonates with the present; and how the particular historic and contemporary connections that exist between Marylebone Station and the wider communities it serves might be reflected within the design’s composition.

Environmental and Social Disclosure of Brazilian Banking Financial Institutions from the Perspective of the Sustainable Development Goals

Objective: The objective of this study is to investigate the determining factors that influence the disclosure of environmental and social information by the Brazilian banking sector from the perspective of the Sustainable Development Goals (SDGs), with the aim of identifying which organizational characteristics impact the level of socio-environmental disclosure. Theoretical Framework: In this topic, the main concepts and theories that underpin the research are presented. The study is based on the Theory of Legitimacy, which provides theoretical elements for socio-environmental disclosure. This theory explains management’s motivation to disclose environmental information, recognizing that organizational survival depends not only on financial success but also on the ability to maintain a social contract with society. Method: The methodology adopted for this research comprises a quantitative approach based on content analysis of sustainability reports from Brazilian banks. Data collection was carried out through the analysis of corporate disclosure reports published between 2016 and 2020. The regression model with panel data was used to analyze the influence of organizational characteristics on the dissemination of socio-environmental information from the perspective of the SDGs. Results and Discussion: The results obtained revealed that the size of the company and public control are factors that influence the disclosure of socio-environmental information regarding the SDGs. Whether or not the company owns shares on the Stock Exchange and its profitability have little impact on the amount of information disclosed about the SDGs. In the discussion section, these results are contextualized based on the theoretical framework, highlighting the implications and relationships identified. Possible discrepancies and limitations of the study are also considered in this section. Research Implications: The practical and theoretical implications of this research are discussed, providing insights into how the results can be applied or influence practices in the field of socio-environmental disclosure. These implications could encompass the banking sector, regulatory bodies, and policymakers. Originality/Value: This study contributes to the literature by deepening the knowledge about environmental disclosure in the banking sector, a topic still little explored in academic studies. The relevance and value of this research are evidenced by its potential to inform better practices and policies for socio-environmental disclosure in the banking industry.

Information centralization and stock price crash risk: Cross-country evidence

Our study investigates whether access to corporate disclosure via a national database affects stock price crash risk. Exploiting the staggered implementation of national databases for corporate information dissemination (Officially Appointed Mechanisms, or OAMs) in the European Union countries, we find that stock price crash risk significantly decreases after regulated information disclosed by companies is required to be compiled in OAMs. Consistent with the notion that the centralization of regulated information allows investors to search and compare corporate disclosure across peer firms, we find that the observed effect is more pronounced in firms with more peer firms in the same industry. Further analyses show that this effect is stronger in firms with less transparent information environments and with more retail investors. Collectively, our study sheds light on the role of Regtech adoption in mitigating stock price crash risk.

Toward More Nature-Positive Outcomes: A Review of Corporate Disclosure and Decision Making on Biodiversity

Loss of biodiversity and natural degradation are vital issues that have significant impacts on society and economy. Businesses, investors, and regulators have focused on corporate efforts to support biodiversity and nature-positive activities. This review provides a comprehensive overview of the importance of biodiversity for businesses, its materiality, and the roles of mandatory and nonmandatory regulations in corporate environmental reporting and sustainability disclosure frameworks. It also discusses descriptive information on the evolution of sustainability frameworks by comparing the most prominent sustainability frameworks, with a key focus on the materiality approach and biodiversity-related disclosure recommendations. Furthermore, we provide recommendations for more holistic approaches to improve future sustainability frameworks focusing on the impact of biodiversity. Additionally, we demonstrate the necessity for greater focus on the decision-making paradigm. Further research to measure the impact of biodiversity and innovative trends in sustainability reporting is required to better reflect nature-positive outcomes in corporate sector businesses.

Executive educational background and corporate strategic information disclosure

This study analyzes the link between executives' educational background and corporate strategic information disclosure, and the empirical results show that in firms with higher levels of executive education, the higher the executives' educational level, the higher frequency of corporate disclosure, and the higher number of positive and negative announcements reported. In firms with lower levels of executive education, the higher education level of executives, the lower frequency of corporate disclosure, the more favourable announcements will be reported and the fewer negative announcements will be reported.

The conjoint effects of corporate social responsibility performance and report tone on financial constraints: Evidence from China

Using corporate social responsibility (CSR) disclosure data from Chinese A-share listed firms between 2008 and 2022, we examine the conjoint impact of CSR performance and the tone of CSR reports on financial constraints. The research reveals a significant negative correlation between CSR performance and financial constraints, indicating that the better a firm's CSR performance, the fewer financial constraints it faces. The tone of CSR reports is also negatively correlated with financial constraints. It has a synergy effect with CSR performance, enhancing the alleviating effect of CSR performance on financial constraints. After conducting a series of robustness tests, such as addressing endogeneity and substituting variables, the main results remain robust. Furthermore, relative importance analysis shows that the impact of CSR performance on financial constraints is significantly greater than the impact of the tone of CSR reports. In additional analysis, we also examine the effects of corporate disclosure of creditor protection information, the presence of deficiencies in information, and firm transparency. Against the backdrop of heightened economic volatility and escalating risks, our findings offer valuable guidance on how firms can strategically utilize social responsibility measures to mitigate financial constraints.

Board monitoring and corporate disclosure: the role of the institutional environment and firm-level governance

PurposeThis article aims to answer two research questions that remain controversial in the accounting and corporate governance literature: (1) how corporate disclosure is related to board monitoring and (2) how this link is affected by the institutional environment and firm-level governance.Design/methodology/approachThe study is based on S&P data on corporate disclosure by Russian companies collected over 2002–2010 and supplemented by information from the SKRIN database. The dataset covers 125 non-financial companies, with 559 observations in total. We use three indicators of board monitoring: the percentage of non-executive directors, a dummy for two-tier boards, and a dummy for an audit committee. The firm’s governance is proxied by a dummy for single class stock, while the institutional environment is proxied by a dummy for ADRs/GDRs. We apply conventional methods of panel data analysis with several robustness checks, including the random- and fixed-effects models, 2SLS that addresses the potential endogeneity of board composition, alternative definitions of the dependent variable, and an extended list of controls.FindingsWe find a positive (complementary) relationship between the amount of disclosure and the proxies for board monitoring employed. This complementary relationship turns out to be the strongest among companies that have better internal governance but face a weaker institutional environment. There is little evidence of such complementarity under strong institutions.Practical implicationsThe findings may be of interest to investors and policymakers. As to the former, the results warn of firms that provide limited disclosure in the presence of strong corporate governance arrangements, such as independent boards, as these factors are not substitutes for each other. As to the latter, the results support comprehensive policies aimed at simultaneous improvements in both board governance and corporate disclosure in weak institutional settings.Originality/valueThis paper uses a unique setting and rich, partly proprietary data to extend the existing literature on the relationship between corporate disclosure and board monitoring, with an emphasis on the moderating role of the institutional environment and firm-level governance. It is also one of the very few studies of corporate disclosure in Russia, an important emerging economy of the early 2000s.

Does financial materiality judgement matter in reporting intellectual capital? A systematic literature review and future research trends

PurposeThis paper aims to investigate materiality judgement providing insights, critiques and future research paths in light of the open debate on the role of materiality in corporate financial disclosure, highlighting potential connections and implications with sustainability and intellectual capital (IC) reporting.Design/methodology/approachThe research presents an overview of the analysis of financial materiality, including new stimuli from recent studies and regulatory requirements for financial and non-financial reporting. Accordingly, this study used a systematic literature review (SLR) based on a combination of content, text and bibliometric analysis of materiality in accounting research studies, collecting data from the Scopus database as one of the most relevant repositories.FindingsThe SLR identified four relevant research trends, concerning: (1) the relevance of materiality principles in corporate disclosure; (2) financial reporting practices and materiality; (3) theories and approaches in defining financial materiality and (4) the existence of quantitative and qualitative thresholds in the materiality judgement.Research limitations/implicationsThe results provide theoretical and practical implications when comprehending the development of the concept of financial materiality in financial statements and whether they can be appropriate in reporting IC as well. We identified future research paths.Practical implicationsFrom a practical perspective, this study is useful for companies implementing financial materiality based on stakeholder engagement and improving their transparency in financial and non-financial reporting practices.Social implicationsThe research investigates if the process for assessing materiality is in line with the expectations of all stakeholders involved in financial and non-financial reporting.Originality/valueThis research is the first to investigate the scientific basis and applicability of the concept of financial materiality to sustainability and IC reporting.