Disclosure Of Non-financial Information Research Articles

Multi-level benchmark system for sustainability reporting: EU experience for Ukraine

The paper analyzes the key European benchmarks in the field of compiling and submitting sustainability reports. The analysis concerns the disclosure of their features in the context of considering the introduction in Ukraine to increase transparency, accountability and investment attractiveness of Ukrainian enterprises. Based on content and comparative analyses, a comparison was made of the key provisions of sustainability reporting issued by various standards-setters (ISSB (International Sustainability Standards Board), EFRAG (European Financial Reporting Advisory Group), SEC (The United States Securities and Exchange Commission), GRI (Global Reporting Initiative), and IIRC (International Integrated Reporting Council)) as a methodological level of the system of such benchmarks. The global impact of the specified benchmarks is complemented by an analysis of the impact of Directive 2014/95/EU (Non-Financial Reporting Directive – NFRD) and the new Directive 2022/2464/EU (Corporate Sustainability Reporting Directive – CSRD) on the introduction of the sustainability reporting. It is proved that in the context of the formation of the Ukrainian accounting system on the way to European integration, the transposition of the requirements of these Directives is the first step towards streamlining the regulatory framework for companies’ sustainability reporting. A two-level sustainability reporting benchmark system is presented, which at the operational level is based on the EU directives on disclosure of non-financial information and sustainability reporting, and at the methodological level – on the European Sustainability Reporting Standards and other generally accepted standards. Acknowledgment Inna Makarenko gratefully acknowledges support from the Supreme Council of Ukraine (0122U201796).

How Does Supply Chain Information Disclosure Relate to Corporate Investment Efficiency? Evidence from Chinese-Listed Companies

Supply chain information disclosure is a vital factor for corporate investment efficiency and can signal a corporation’s long-term sustainable development. However, little attention has been paid to its significance. In this paper, we investigate how supply chain information disclosure affects corporate investment decisions. Using a sample of Chinese-listed firms, we find that firms that disclose nonfinancial information are more likely to have a high level of investment efficiency. We also identify the mechanism underlying the effect by examining the mediating effect of financial constraints and agency costs. Increasing a firm’s supply chain information disclosure can improve its investment efficiency by reducing its financial constraints and agency costs. We further find that this positive impact is more pronounced for non-state-owned enterprises (non-SOEs) and firms located in regions with a high degree of marketization. Our findings imply that supply chain information disclosure plays an important role in corporate investment efficiency and sustainable development. Our study emphasizes the importance of nonfinancial information disclosure, contributing to the literature investigating the role of supply chain management in corporate decision-making on sustainable development.

Comparative Analysis of ESG Information Disclosures

ESG is a framework for the disclosure of non-financial information about companies, an investment philosophy and corporate evaluation criteria that focuses on non-financial performance. ESG ratings are a key part of ESG development, and the current number of global ESG rating agencies, with very different backgrounds and divergent ratings, makes it difficult to generate consensus on the ratings of the same subject. Therefore, on the basis of sorting out the situation of 11 famous ESG rating agencies and comparing and analyzing the ESG evaluation system of each rating agency, the study found that China's existing ESG rating system has core problems such as poor quality of information disclosure, inconsistent ESG rating results and imperfect ESG ecosystem, and accordingly put forward several suggestions for China's future ESG development.

Effect of CEO Ownership Power and Integrated Reporting Among Listed Firms in East Africa

Purpose – The pressure on businesses to disclose information that goes beyond the financial aspects and includes non-financial information has grown as social, environmental, and accountability issues are receiving more attention. Integrated reporting (IR) is a technique that can close the information gap by focusing on both financial and non-financial aspects, on the linkages that already exist between the various business processes, and on the capacity of the firm to generate value over the short, medium, and long term. However, studies on the determinants of IR are limited, inconclusive, contradictory and mainly studied in developed economies. This study aimed at examining the effect of CEO ownership power on IR from a developing region perspective (East Africa). Design/methodology/approach – The study adopted explanatory and longitudinal research design with panel data to establish the causal relationship between CEO ownership power and IR. The empirical study was based on a sample of 702 firm-year observations among listed firms in East Africa for the period 2013 to 2021. Findings – The findings indicate a positively significant relationship between CEO ownership power and IR among firms listed in the East African securities exchange. Practical limitation/implications – The study used one dimension of CEO power (ownership), other studies could incorporate other dimensions of CEO power (structural, expert & prestige) and in other different contexts. From a managerial practical perspective, it shows that CEOs owning shares in the company influences the level of IR. The insights also provide useful information to shareholders and regulators in evaluating the CEO ownership power that affects IR in East Africa. This study also implies that policymakers can encourage shareholding by CEO to enhance IR. Originality/value – literature review shows a few studies have investigated the relationship between CEO ownership power and IR in the developing world specifically the East African context. This study provides empirical evidence on the impact of CEO ownership power on IR and how ownership of shares by the CEO in a firm influences the disclosure of financial and non-financial information.

Does ESG Affect The Firm Value?

Objective - As the concept of sustainability develops in the industrial world, stakeholders are compelled to consider ESG performance when measuring company value. A company needs to increase its value and demonstrate its sustainability capabilities by publishing sustainability reports on ESG factors. This research aims to inquire whether ESG affects the firm's value. Methodology/Technique – The causality research is analyzed with Eviews using ASEAN panel data from 2019-2021 to measure the effect of ESG on firm value with a total of 738 firm years of data. Findings - Environmental performance is associated with high ecological costs in developing nations and is a burdensome additional expense that will deteriorate the company's financial condition. Disclosure of nonfinancial information jeopardizes the creation of company value, resulting from meeting the demands of stakeholders imposed on the company, thereby causing other agency conflicts. The relatively low level of investor confidence in the signal contributes to ESG performance that lowers the company's market value. Most investors respond negatively to these signals, assuming that the activities disclosed in ESG reporting are too costly and detrimental to their interests. They could be more enthralling in investing, decreasing market demand, and reducing the company's value. Novelty - This study explains the determinants of firm value from ESG scores and separate ESG scores in the ASEAN market. Type of Paper: Empirical. JEL Classification: F64, L50, Q25, G02, G39, M14 Keywords: ESG, Firm value, Environment score, Social score, Governance score, Sustainability Reference to this paper should be referred to as follows: Palupi, A. (2023). Does ESG Affect The Firm Value?, Acc. Fin. Review, 7(4), 19 – 26. https://doi.org/10.35609/afr.2023.7.4(3)

Significance of Corporate Non-Financial Information Disclosure for Sustainable Economic Growth

According to the objective of achieving "an intelligent, sustainable and inclusive growth" in the European Union (EU) 2020 agenda, the information disclosure regarding sustainability of large companies mainly aims to contribute to the potential of the single market, thus creating sustainable development and employment levels. It is very important for companies to increase their transparency for interested parties, improve their risk management and provide better results. High transparency, including the diversity of management bodies, determines the trust growth of people in companies and markets, and allows more efficient capital distribution and the possibility of making a more realistic decision (e.g., by investors) according to available information. For current challenges, such as global warming, effects of the consumption society on environment, emphasis of disparities, worsening of environmental problems and urbanization of population, related replied have been made, representing that more efforts have been made for the transition towards a green model and for meeting the sustainable development objectives. Significant steps have been taken in this direction, but greater efforts should be made. The new economic system should rely on sustainable development, which is the solution to overcome current social, environmental and economic problems. Non-financial reporting is just a tool. In order to add value, companies should use the tool to contribute more, thus being closer to the global initiatives related to the green economy and building a sustainable society. Increase of these global trends has a significant impact on business environment, leading to measures taken immediately. Therefore, the true benefits of non-financial reporting will not be noticed unless entities change their focus from strict evaluation of financial performance to non-financial elements and integrate sustainability in their business model. Meanwhile, companies should focus on reporting the aspects, which are significant for them, the interested parties and the investors, and ensure that all these aspects are communicated to the management. Analysis of the non-financial information, presented by the active entities in the field of electrical energy production in Romania between 2017-2020, showed that only six companies met the legal requirements of non-financial information disclosure, which are state-owned companies with full or majority state capital and state-owned companies/societies.

Does stock market index adjustment affect environmental information disclosure? Evidence from China

This study empirically investigated the effect of adjustment of the China Securities Index 300 (CSI 300) on environmental information disclosure (EID) by index constituents, based on propensity score matching and difference-in-difference approaches. The results showed that the inclusion in the CSI 300 significantly improved the quality of EID by firms. Moreover, this positive impact was more pronounced among firms with lower agency costs and those located in regions with a stronger legal environment. Further testing of the mediating mechanism revealed that becoming an index constituent served to curb opportunistic behavior by managers arising from shortsightedness. Our results were valid after addressing the potential endogeneity between index adjustment and EID and remained unchanged in various other robustness tests. The findings provide support for the positive impact of stock market index adjustment on non-financial information disclosure and have practical implications for decision-making regarding EID in China and other emerging markets.

Regulations on Non-Financial Disclosure in Corporate Reporting: A Thematic Review

There is a growing call globally for corporations to improve transparency in corporate reporting, along with the surge of enhancing disclosure of non-financial information. Companies are seen as agents for contributing to a better future, and hence could assist in achieving the sustainable development goals (SDGs) 2030, via transparent non-financial disclosure. This review paper is premised on the fact that laws on non-financial disclosure may be useful in enhancing the transparency of companies’ conducts. Hence, this systematic review aims to synthesize the literature from 2014 to 2021 on the patterns and trends relating to regulations on non-financial disclosure in corporate reporting by companies. A keyword search followed by filters provided by the Web of Science Core Collection and SCOPUS databases resulted in a total of 369 documents being found. A total of 62 articles were reviewed after manual filtering and exclusion. A thematic review of these 62 articles identified 20 initial codes, which were then grouped into eight clusters: Directive 2014/95/EU, disclosure approaches, fiduciary duties of directors, stakeholder engagement, the effectiveness of disclosure regulations, the impacts of rules, the role of different actors and corporate accountability. The paper finds that the patterns and trends in the review set the path for future research on laws of non-financial disclosure, as they serve as a guideline for researchers for future studies.

A Text-Based Competition Network

This paper utilizes nonfinancial information disclosure to develop a measure of text-based competition network. Using the data of China's listed firms, the authors adopt the textual analysis method to identify a unique group of competitors for the focal firm and construct the text-based competition network. In the whole network, leading firms receive increasing attention from competitors, and they play a vital role for the dynamic changes in the whole market. Moreover, the interactions between the focal firm and competitors in the text-based competition network are shown by some financial indicators. The characteristics of the text-based competition network have a significant impact on the future performance of the focal firm. Finally, economic links in the competition network are discussed by varying the number of competitors, which shows the impact of various competitors on economic similarities. The text-based competition network shows the relative importance of competitors for the focal firm and explains firms' decision-making from the perspective of dynamic competition.

Evaluation of non-financial information and its contribution to advancing the sustainable development goals within the Spanish banking sector

Non-financial information and its contribution to the achievement of each Sustainable Development Goal (SDG) are assuming great relevance in the business world, in which it is not enough to be economically sustainable without also being sustainable from ethical, environmental, and social points of view. An analysis of how the financial sector contributes to the achievement of the SDGs is crucial in two ways. Firstly, due to the relevance and the magnitude of this sector itself; secondly, and more importantly in our view, because of the financial leverage of the banking sector that has a mandate to facilitate the transition of all economic sectors towards sustainability, guided by the 2030 Agenda. However, despite the expectations placed on banking entities, there is a research gap on their disclosure practices and on the SDG-related information that they report. In addition, the academic literature centered on the analysis of SDG-related disclosures through artificial intelligence is very scarce. To fill this gap, the objective of our study is, on the one hand, to analyze whether there is greater homogeneity in the disclosure of non-financial information in the Spanish banking sector following the transposition of Directive 2014/95/EU into Spanish Law. On the other hand, it is to evaluate the contribution of banking entities to the SDGs. To do so, the non-financial information reports of 12 Spanish banks are analyzed, completing a comparative evaluation and using artificial intelligence to identify mentions of each SDG and its targets. The Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) was also used to rank the banking entities in accordance with their contribution to each SDG. The results reflected the plurality, in both breadth and quality, in the disclosure of non-financial information and in the contribution to the SDGs. The only point in common between all the entities that were studied was the use of the GRI disclosure framework and the identification of the priority SDGs, positioning SDGs 8, 13, and 4 in priority positions. The banks with higher bank capitalization levels occupied the top of the ranking of contributions to the SDGs. Differences were presented for all other aspects, even to the point of highlighting that some entities or independent verifiers had not offered all the information. In conclusion, greater efforts to improve the quality of non-financial reporting and further development of the common regulatory framework will be fundamental for better comparability between the reports from banking entities. Furthermore, this study shows that natural language processing can be applied to better measure companies' alignment with the SDGs based on the text of their non-financial reports.

ІНСТИТУЦІЙНІ ЗАСАДИ ТА ДОСВІД ЗАПРОВАДЖЕННЯ НЕФІНАНСОВОГО ЗВІТУВАННЯ КОМПАНІЙ В ЄВРОПЕЙСЬКОМУ СОЮЗІ

The process of conceptualizing global sustainable development actualized the task of increasing the transparency and accountability of companies in terms of the impact of their activities on the environment, economy and society. To solve it, the institute of non-financial reporting was introduced into economic practice. The purpose of the article is to study the process of institutionalization of non-financial reporting of companies in the EU and generalize the experience of disclosure of non-financial information by companies in EU member states in order to justify the system of nonfinancial reporting of Ukrainian companies on the institutional basis of the EU. The adoption by the European Parliament and the Council of the EU of Directive 2013/34/EU and Directive 2014/95/EU became a powerful impetus for the development of the institution of non-financial reporting. However, due to the transposition of certain norms of Directive 2014/95/EU into the national legal systems of the EU member states with significant differences, the institution of non-financial reporting currently has certain shortcomings: the scope of application is not clearly defined enough, there are significant differences in the presentation of non-financial information, which complicates its analysis and comparison, disclosure of non-financial information requires significant administrative costs and costs for its verification, etc. Therefore, today an urgent task is to revise the existing legislation of the EU and participating countries, taking into account the interests of all parties interested in the non-financial reporting of companies. Based on the analysis and generalization of the experience of disclosure of non-financial information by companies in EU member states, the article identifies the features, positive and negative consequences of non-financial reporting for companies. The positive impact of non-financial reporting on the company's institutional environment has been proven: increasing the transparency of the company's activities in such areas as the environment, society, human rights, and anti-corruption; development of internal procedures and practices; improvement of communication policy in supply chains and business practices; ensuring the appropriate level of integrity of the company; increasing the level of trust of stakeholders and investors. Based on the results of the research, directions for improving the system of non-financial reporting of Ukrainian companies based on the EU institutional framework are substantiated.

Investment issues of agricultural enterprises in the context the development ESG agenda

This article examines the need for disclosure of non-financial information in agricultural organizations. The authors use the comparison method to prove the need to disclose information in the social, environmental and corporate governance spheres. The importance of dividing into these areas is explained by the ESG agenda. The authors of the article emphasize that there is a sufficient number of studies confirming the positive impact of disclosure of non-financial information on various companies. It was noted both the impact of non-financial disclosures on the financial performance of companies (such as return on assets and return on equity), and the increase in the investment attractiveness of organizations, resulting in stock prices raise. In most cases, this can be explained by current trends, according to which solving environmental problems is a key task. As a result of the analysis, it was concluded that companies need to follow trends and disclose significant facts not only about the financial component of their activities, but also about the non-financial – how they affect the environment and society.

Value Relevance of ESG Accounting Disclosure: Evidence from SubSaharan Africa Public Health Companies

The study examined the value relevance of ESG information disclosures in healthcare sectors, by observing about 15 companies in sub-Saharan Africa (SSA), from 2006-2020, using a panel regression analysis. The study employed four models to explicate the individual and aggregate effect of the value relevance of the disclosure, ESG information, and Variance Inflation Factor was used to confirm the absence of the problem of multicollinearity. Signalling theory and Agency theory were considered in this study. Our findings therefore expound that the ESG disclosures, either aggregately or individually, positively augments the value of healthcare companies significantly, except for social disclosures with an insignificant effect. We further compare the value relevance of ESG disclosure against the profitability performance of healthcare companies in SSA. Hence, findings revealed that ESG disclosure is of higher value relevance compared to profitability performance. The study therefore concludes that the disclosure of non-financial information, ESG, as against financial information, Returns on Asset, augments the value of an average healthcare company in sub-Saharan Africa.

Building Long-Term Trust in Sustainable Finance

The article considers the main techniques for establishing the kind of long-term trust that is necessary for making responsible investments that are consistent with the principles of sustainable development and that will produce the long-term value which is the main goal of corporations participating in sustainable finance. The creation of such techniques is being carried out in close cooperation with international financial organizations and market participants. In order to make current thinking about sustainable financing more systematic, especially as it applies to building long-term trust, the author has concentrated on providing useful descriptions. The article describes the current progress toward standards for the disclosure of non-financial information by corporations; creation of taxonomies for sustainable activities and their application in financial markets; introduction of verification that corporate activities comply with the taxonomies for sustainable activities; and the development and use of ESG ratings in responsible investment. The main research method is analysis of documents of international (including financial) organizations, associations of financial market participants, large business associations, development institutions, and rating agencies. The problematic areas of the mechanisms being constructed are identified (primarily with respect to disclosure of non-financial information and the development of ESG ratings), and the article provides recommendations from international financial organizations on how to overcome the problems identified. The process of developing standards for disclosure of non-financial information and ensuring its reliability, both of which are necessary for sustainable investment, is proceeding rapidly. The article is addressed to a wide variety of readers, who should find it useful for learning how sustainable finance principles are being put into practice by corporations and financial markets. The information in this article can be used for developing strategic economic policy where it intersects with sustainable development.

Интегрированная отчетность: история, верификация, перспективы

The article is devoted to the study of integrated reporting as a dynamically developing part of corporate reporting. Public non-financial reporting is defined as a set of indicators reflecting the goals, approaches and performance of corporations on significant issues of social responsibility and sustainable development. Despite the identified similarities between various approaches to disclosure of non-financial information, the hallmarks of integrated reporting are integrated thinking underlying the management structure, commitment to the environmental agenda, and demonstrating the ability of an economic entity to generate value in the short, medium and long term. The objectives of the study are to identify the historical stages in the development of integrated reporting in the Russian Federation, to determine the method of verifying such reporting, which causes the greatest confidence among stakeholders, and to identify the prospects for reporting non-financial nature in the format of integrated reporting. The work used general scientific principles and methods of research: induction and deduction, synthesis and analysis, logical linking, systematization of the theoretical foundations and practice of presenting non-financial information by economic entities included in the MOEX (Moscow exchange index) and MCXSM (middle and small capitalization index) indices. In the course of the work carried out, it was revealed that not all companies that list their shares on the Moscow exchange publish non-financial information, and companies that place non-financial statements do this in the form of a sustainable development report, integrated reporting, social report, environmental report or social environmental report. The scientific novelty of the study lies in the development of the author’s periodization of the stages of development of integrated reporting in the Russian Federation; development of audit stages for integrated reporting based on the International Standard for Assurance Engagements, as well as taking into account the specifics of the structure and principles of disclosure of non-financial information; formation of a SWOT-analysis matrix of integrated reporting in terms of information on sustainable development. The results obtained in the course of the study are of theoretical and applied importance and can be used as a basis for preparing an integrated reporting package; the plan and program for the audit of non-financial information, as well as when substantiating the decision to place integrated reporting in the public space. The direction of further research is the structure of the package of integrated reporting, taking into account the peculiarities of the functioning of the ecosystems of an economic entity, as well as the development of a SWOT-analysis matrix for integrated reporting in terms of information on ecology and social.

Non-Financial Information Disclosure and High-Tech Executives' Insider Trading

This study investigates the relationship between non-financial information disclosed in annual reports and the probability of high-tech executives' insider trading by analyzing the readability of annual reports of high-tech companies listed on A-share markets from 2007 to 2021. The study finds that the lower the readability of the annual report, the higher the likelihood of insider trading by high-tech executives. This suggests that executives may manipulate annual reports to "conceal the obvious." Further research indicates that transparency in financial information, private ownership, and institutional investor holdings can restrain executives' opportunistic motives. This study offers insight for improving existing market supervision mechanisms for high-tech companies.

Organisational and methodological support of integrated reporting to disclose non-financial information in conditions of sustainable development

The improvement in the disclosure of financial and non-financial information in most cases is provoked by the desire of the international professional community to develop fundamentally new scientifically sound, but at the same time aimed at applying the provisions of international standardization, requirements that would contribute to increasing informativeness in the context of non-financial data disclosed in integrated reporting. In this regard, this study addresses the issues of organizational and methodological support for the formation of integrated reporting in terms of its filling with information. The purpose of the study is the formation of organisational and methodological approaches to ensure integrated reporting in order to disclose non-financial information in conditions of sustainable development. Organisational approaches to ensuring the formation of integrated reporting in terms of non-financial information are defined. The definition of a "system" is given in the context of a set of consistently implemented actions, on the basis of which non-financial data is transformed into a certain kind of information. The basic provisions of the systematic approach in the preparation and disclosure of information of various kinds are described. The procedures forming the whole system of preparation of non-financial information for disclosure in integrated reporting are given. The corresponding methodological support is proposed for the purpose of preparing and implementing high-quality non-financial information in the integrated reporting system. An assessment is made of studies of types of capital for the purpose of disclosure in the type of reporting under consideration.

Level of voluntary disclosure and market value: An applied study on companies listed in Amman Stock Exchange

Voluntary disclosure is viewed as an essential communication tool through which the company's ideas can be promoted to potential stakeholders, which contributes to achieving the company's growth and sustainability. This study came to reveal the reality of voluntary disclosure in the Jordanian industrial companies and its impact on its market value. The descriptive-analytical approach was adopted, where content analysis of the financial reports published by 72 industrial companies listed on the Amman Stock Exchange during the period (2016-2022). The study found that the level of disclosure of non-financial items included the aspects of the board of directors, social responsibility, and community policy were high, which reached 56%, compared to the level of disclosure of financial items, which reached 43%. This indicates that companies pay more attention to disclosing non-financial items than financial items. In addition, the study indicated that companies with a high level of voluntary disclosure have a better market value compared to those companies that have not disclosed or have a lower level of disclosure. Moreover, increasing voluntary disclosure of strategic information, financial information, and non-financial information increases the market-to-book value, because voluntary disclosure enhances the information available to investors about shares, which in turn improves the market value.

Устойчивое финансирование в новых политических и экономических реалиях

The article reviews recent trends in sustainable finance development. The new economic and geopolitical challenges resulted in volume decrease of the sustainable debt market in 2022. Still the estimates for the next year and especially in the mid and long term are more optimistic. Besides the falling markets the analysis shows qualitative changes in project structure as well as in investment preferences. Though the decarbonization maintains its dominant position as green finance priority, the nature and biodiversity protection attracts more and more attention. The energy transition became better tailored to national interests and very often accepts transition financing of the so-called brown industries. Alongside with green finance during COVID?19 pandemic and after the socially responsible finance continues to enlarge its importance. The focus of the research is also the rapid growth in the last years of the climate and other ecological risks as well as financial regulators policies at different levels (national, regional, global) to mitigate these risks. The author came to the conclusion that the elaboration of the sustainable finance principles and standards, including the disclosure of non-financial information and, to some extent, measures against greenwashing are more or less successful. Still, the real flows of capital and the role of private finance are still insufficient to achieve the declared goals, especially what concerns the development finance. It is evident that the global problems of climate change and environmental disruption can be solved only by the global cooperation of all countries.

ESG izveštavanje najvrednijih brendova - otkrivanje tema značajnih za održivi razvoj

By popularizing the concept of sustainability, companies are increasingly incorporating sustainability principles into their business strategies. More efforts are being made in the processes of measuring, analyzing, driving, and communicating sustainable initiatives and efforts undertaken by companies in the areas of governance, environmental impact, and society. Stakeholders, particularly investors, are increasingly demanding the disclosure of non-financial information in addition to what is already published in financial reports. This study explores the ESG reports of the top five companies from the 2023 Interbrand list of the 100 Best Global Brands, covering the period from 2018 to 2022. The aim of the study is to identify the type and content of information disclosed in the ESG reports of companies with most valuable brands, analyze them, and draw conclusions about ESG reporting. Although ESG reporting provides many business benefits, and more companies have been publishing these reports in recent years, there is no unified standard for ESG reporting, as evidenced by the research findings. The analysis identified the topics addressed by companies with most valuable brands in their reports, particularly during the crisis caused by the COVID-19 pandemic. It can be concluded that the environmental impact segment remains the most prominent in the ESG reports of the mentioned companies.