Financial Disclosure Research Articles

Does climate governance affect waste disclosure? Evidence from the U.S.

ABSTRACT Traditional corporate governance mechanisms can improve corporate financial and non-financial disclosures. However, how corporate climate governance affects firms’ waste disclosure remains unclear. Contributing to the emerging climate governance concept, this study investigates climate governance’s impact on waste disclosure using a sample of U.S. non-financial firms from 2002 to 2019. This study makes two contributions to the disclosure and governance literature. First, it shows that high-quality climate governance improves firms’ waste disclosure (including hazardous and non-hazardous waste disclosures). It reveals that climate governance quality affects firms’ waste disclosure through several channels. Second, we show that higher waste disclosure and climate governance quality reduce firms’ market performance. Climate governance quality has a significant positive moderating role in the relationship between waste disclosure and firms’ market performance; higher climate governance quality positively impacts firms’ market performance through waste disclosure. The results are robust to alternative proxies for waste disclosure, different regression techniques, and endogeneity issues.

Auditor Materiality Disclosures and Investor Trust: How to Address Conditional Risks of Disclosure Mandates

ABSTRACT This study contributes to the literature examining the benefits and costs associated with auditor quantitative materiality disclosures. We conduct an experiment to examine a conditional risk associated with such disclosures: that investors with heightened concerns about earnings management, a qualitative concern, will anchor too strongly to the quantitative threshold and lose trust in the audit. The experiment manipulates (1) whether investor concerns about earnings management are low or high and (2) whether auditors provide a quantitative materiality disclosure. We find that quantitative materiality disclosures mislead investors when they have high concerns about earnings management. Specifically, investors lose trust in the auditor’s ability to identify errors that are quantitatively small, but important from a qualitative perspective. A second experiment further suggests that auditors’ provision of detailed, rather than nominal, qualitative materiality disclosures can mitigate this conditional risk. Our study contributes to practice and literature on financial disclosure, materiality, and investor behavior. Data Availability: Data are available from the authors upon request.

Cryptoassets: Definitions and accounting treatment under the current International Financial Reporting Standards framework

AbstractThis paper provides a first comprehensive definition of cryptoassets for accounting purposes in the types of payment tokens, electronic money (e‐money) tokens, utility tokens and security tokens. The delivery of definitions for accounting purposes addresses some of the concerns raised by the European Financial Reporting Advisory Group (EFRAG) discussion paper and helps accounting regulators adapt current International Financial Reporting Standards (IFRS) standards to blockchain‐based tokens' taxonomy and nature. The paper helps policymakers reconcile Markets in Cryptoassets Regulation Proposal's (MiCA) definitions and classification of cryptoassets with the EFRAG's specific needs for clarification and/or amendment in the IFRS standards and contributes to providing an accounting guide for practitioners in their financial disclosure.

A Novel Ensemble Learning Approach for Stock Market Prediction Based on Sentiment Analysis and the Sliding Window Method

Financial news disclosures provide valuable information for traders and investors while making stock market investment decisions. Essential but challenging, the stock market prediction problem has attracted significant attention from both researchers and practitioners. Conventional machine learning models often fail to interpret the content of financial news due to the complexity and ambiguity of natural language used in the news. Inspired by the success of recurrent neural networks (RNNs) in sequential data processing, we propose an ensemble RNN approach (long short-term memory, gated recurrent unit, and SimpleRNN) to predict stock market movements. To avoid extracting tens of thousands of features using traditional natural language processing methods, we apply sentiment analysis and the sliding window method to extract only the most representative features. Our experimental results confirm the effectiveness of these two methods for feature extraction and show that the proposed ensemble approach is able to outperform other models under comparison.

Does XBRL Tagging Indicate Disclosure Quality? The Relationship Between XBRL Standard and Extension Tags and Stock Return Synchronicity

ABSTRACT We propose new measures of financial disclosure quality based on XBRL standard and extension tag counts. XBRL is designed to allow users to analyze more financial statement detail, thereby increasing reporting transparency. Thus, firms that use more XBRL standard tags should produce more detailed and comparable financial reports. To test this assertion, we examine the association between XBRL tag counts and stock return synchronicity, which measures the market’s reaction to the quality of firms’ disclosures. We find that firms that use more standard taxonomy tags in their 10-K reports have higher stock return synchronicity after the 10-K filing. However, we find that stock return synchronicity decreases as XBRL extension tag counts increase, suggesting that the use of extension tags reduces disclosure quality. Our findings contribute to the growing body of research on XBRL disclosure. Data Availability: Data are available from the public sources cited in the text.

FINANCIAL ASPECTS AND FINANCIAL RISK DISCLOSURE: EVIDENCE FROM VIETNAM

This study delves into the dynamic relationship between profitability, liquidity, and financial risk disclosure within the context of the Vietnamese business landscape. Employing a comprehensive dataset spanning the period from 2011 to 2020, encompassing 350 publicly listed companies, we scrutinize the intricate interplay of these critical financial factors. Our investigation reveals significant insights into the influence of profitability and liquidity on the extent of financial risk disclosure by Vietnamese listed firms. Through rigorous statistical analysis and econometric modeling, we establish a clear and robust link between these variables. The findings underscore the pivotal role played by profitability and liquidity as determinants shaping the propensity of firms to disclose information pertaining to their financial risks. As Vietnam's financial landscape continues to evolve and integrate within the global economy, the implications of our research offer valuable insights for regulators, investors, and corporate decision-makers alike. By shedding light on the nuanced relationship between profitability, liquidity, and financial risk disclosure, this study contributes to a deeper understanding of the mechanisms that underpin corporate financial reporting practices in an emerging market context.

Value relevance of compliance with IFRS 7: evidence from Canada

PurposeThis paper aims to test whether the extent of compliance with International Financial Reporting Standards (IFRS) 7 requirements is value relevant and whether it influences the value relevance of the firm's accounting information (book value of shareholders' equity and net income).Design/methodology/approachThe sample for this paper consists of 288 financial institutions listed on the Toronto Stock Exchange (TSX) from 2016 to 2019. Panel regressions have been used in this study.FindingsThe findings reveal that compliance with IFRS 7 is positively associated with the firm's market value. After making a classification between high-compliance and low-compliance companies, the authors' results indicate that the compliance level is positively associated with the value relevance of net income. Surprisingly, when examining the value relevance of financial instruments disclosures (FID) supplied after the adoption of IFRS 9, the authors find that book values of shareholders' equity and earnings are not more value relevant in the post-IFRS 9 period.Research limitations/implicationsGiven that the authors' analysis has been restricted to the Canadian setting, the regression results might not be generalized for other countries with different capital markets features.Practical implicationsThe authors' findings point out that FID can affect investors' decisions as well as their confidence in the companies in which they invest. Hence, the regulatory bodies should gear more efforts to ensure high-compliance levels.Originality/valueTo the best of the authors' knowledge, this research is among the first attempts to investigate whether the new FID (after the adoption of IFRS 9) improves the firm disclosure quality and enhances the value relevance of accounting information.

How Financial Performance, CSR Disclosure, and GCG Mechanism in Indonesia and Malaysia Banks?

The goals of this study is to ascertain the simultaneous or partial effects of corporate social responsibility disclosure, board size, managerial ownership, and institutional ownership. The population in this study are banking sub-sector companies listed on the Indonesia Stock Exchange and Malaysia Stock Exchange in 2017-2022. The sample selection in this study used a purposive sampling method. The samples obtained were 12 Indonesian banking companies and 6 Malaysian banking companies. The data analysis used is descriptive and panel data regression. Based on the research results, the banks listed on the Indonesia Stock Exchange show that CSR disclosure, board size, and managerial ownership do not affect financial performance and institutional ownership positively affects financial performance. Meanwhile, the banking sub-sector companies listed on the Malaysia Stock Exchange show that CSR disclosure, board size, managerial ownership, and institutional ownership do not affect financial performance

Politicians Support (and Voters Reward) Intra-Party Reforms to Promote Transparency

Political parties increasingly rely on self-regulation to promote ethical standards in office. The adoption of ethics self-regulation and its ability to induce change is likely to be a function of the responses from politicians and voters. Without external enforcement mechanisms, compliance requires support from legislators. In turn, if voters perceive self-regulation as cheap talk, officials have fewer incentives to acquiesce. The extent to which such efforts are rewarded by voters and supported by elected officials remains an open question. We examine this question in a paired conjoint experiment with elected officials and voters in Portugal and Spain. The results show that politicians support (and voters reward) financial disclosures, lobbying registries, and sanctions for MPs involved in corruption cases. Voters also reward term limits, and the effects are not moderated by ideological agreement. The findings suggest that parties can benefit from promoting transparency reforms and are not penalized by experimentation.

Disclosure and Investor Inattention: Theory and Evidence

ABSTRACT Investors have a finite capacity to organize all information they receive from financial disclosures. Under rational inattention, we show that investor processing capacity affects the probability of disclosure. Our main result is that the likelihood of disclosure is inverse-U shaped in investor attention. For low levels of attention, more attention facilitates communication and increases disclosure; for high levels of attention, more attention better identifies, and therefore deters, unfavorable voluntary disclosures. We provide empirical evidence that the relationship between investor attention and management forecast follows the predictions of the theory, using institutional ownership as a proxy for investor attention as well as exogenous shocks to fund manager distraction. JEL Classifications: D83; G14; M4.

Owner Exposure through Firm Disclosure

ABSTRACT We study whether firms avoid financial disclosures to preserve their owners' financial privacy. We find that firms named after their owner, for whom firm disclosure would more directly expose owner information, are more opaque. Eponymous owners prefer firm opacity when disclosure exposes sensitive owner information with social stigma, in rural and anticapitalist areas, and in insider-oriented settings with high secrecy and distrust. When firms are forced to disclose, eponymous owners more frequently change their firms' names, and new firms are less frequently named after their founding owners. These findings indicate that owner-level privacy concerns dampen firm-level disclosure incentives. Data Availability: The data used in this study are available from public sources listed in the paper. JEL Classifications: D82; L51; M41.

НАПРЯМИ КООРДИНАЦІЇ НОРМАТИВНОГО РЕГУЛЮВАННЯ ВІДПОВІДАЛЬНОГО (ESG) ІНВЕСТУВАННЯ У СВІТІ: ФРАГМЕНТАЦІЯ ЧИ УНІФІКАЦІЯ?

To date, processes of regulatory coordination of responsible or ESG (Environmental, Social, and Corporate Governance) investing are characterized by a combination of fragmentation and unification efforts. On the one hand, there is a noticeable degree of fragmentation of the regulatory landscape for responsible investing. At the level of different regions and countries, their own regulatory frameworks, standards and guidelines for disclosure of ESG information and sustainability reporting are being actively developed and improved. In particular, the European Union (EU), Great Britain, the USA and Canada, some countries of the Asia-Pacific region (Australia, China, Hong Kong, New Zealand, Singapore, etc.) have made special progress. For example, the EU has taken a significant step with the introduction of the so-called triad of regulatory instruments: the Sustainability Taxonomy, the Corporate Sustainability Reporting Directive (CSRD) and the Sustainable Finance Disclosure Regulation (SFDR), aimed at standardizing ESG reporting and classifying investments in sustainable development in member countries. This fragmentation creates difficulties for investors and companies operating in different jurisdictions as they must navigate and comply with different requirements. On the other hand, efforts to unify and harmonize ESG disclosure and regulatory rules are increasing. Recognizing the global nature of ESG challenges, international organizations are working to establish common principles and standards. Initiatives such as the Global Reporting Initiative (GRI), the International Sustainability Standards Board (ISSB), the Task Force on Climate-related Financial Disclosures (TCFD) have gained prominence worldwide, promoting transparency and consistency ESG reporting. While the trend toward unification is promising, achieving full regulatory coordination of responsible investing remains challenging. Different political priorities, cultural and economic differences between countries prevent the creation of a universally recognized regulatory framework. However, the growing recognition of the importance of ESG and the collective efforts of stakeholders around the world indicate a gradual convergence towards more coherent ESG regulations.

New Information in Financial Disclosures Related to Sustainable Development in the Concept of ESG (Version IFRS)

New Information in Financial Disclosures Related to Sustainable Development in the Concept of ESG (Version IFRS)

Is ESG disclosure associated with bank performance? Evidence from the Visegrad Four countries

PurposeThe purpose of this paper is to investigate the relationship between ESG disclosure and banks performance and to discuss how banks are committed to the implementation of sustainability issues.Design/methodology/approachThe authors examined the annual, risk and sustainability reports published by 26 banks located in four Central European countries (Czech Republic, Hungary, Poland and Slovakia) in the period of 2017–2021. The authors applied the methodology of content analysis and developed indexes. Panel regression was performed to improve and ensure the robustness of this study.FindingsThe results show that social and governance aspects dominate the ESG preparedness; however, after 2019, there was a significant improvement in the integration of environmental issues. This study confirms a strong association between bank size (total assets) and ESG reporting, and between capital adequacy and ESG reporting. The results demonstrate that there is no connection between banks' operational and financial performance and ESG disclosure. Finally, this study concludes that the integration of ESG risks into the risk management framework is at an early stage.Practical implicationsThis study also adds to the existing research in the field of sustainability reporting. For regulators, this research proves their essential role in the facilitation of sustainable development. For practitioners, the ESG disclosure index could serve as a “detection tool” in the sustainability self-assessment process.Originality/valueThe authors examined – through a self-developed multidimensional ESG disclosure index – the sustainability reporting of the banking sector in four countries from the Central European region.

Environmentally Sensitive Industries Attributes and Environmental Disclosure in Nigeria: Modelling the Double Hurdle Technique

The environmental damages firms’ activities have caused, has aroused the need for firms to be very sensitive to their operations. The 2011–2020 research examines firm-specific features and corporate environmental disclosure for listed environmentally sensitive firms in Nigeria. Age, size, leverage, and management ownership are the explanatory variables. Environmental disclosure explains the GRI environmental disclosure index. The research assessed corporate involvement in environmental disclosure using double hurdle regression. The population and sample are all 23 Oil & Gas and Industrial Goods firms. The research found that firm size and financial leverage influence disclosure choice and extent of disclosure. Firm age does not affect disclosure choice or intensity. The study proposes that Nigerian corporations should give detail disclosure of environmental information. It should be a listing requirement for companies. This promotes green accounting. As captains of industries, managers should push environmental policies that improve their environmental performance to better align the organisation and its stakeholders.

Effects of Information Relevance of Market Share Price of Quoted Companies in Nigerian Exchange Group: Basic Materials Sector

The purpose of this study is to analyze the impact of financial data on the stock prices of listed firms in the basic materials sector of the NGX. The particular goals are to analyze the market share price of basic material companies listed on the floor of the Nigeria Stock Exchange from 2010 to 2017 in relation to EPS, dividends per share, and return on assets. Secondary information was gathered from the NGX's audited financial statement disclosures. E-view statistical software was used to do regression analysis for inferential statistics on the hypotheses. The results of this analysis indicate that at the 5% level of statistical significance, Return on Assets has a positive and statistically significant influence on the market share price. Market share price is correlated with earnings per share and dividends per share to a lesser extent, although not directly. Overall, there was a positive correlation between the dependent and independent variables due to the significant impact of Return on Asset on Market Share Price. Therefore, it is advised that basic material enterprises in Nigeria enhance the quality of their financial reporting and increase the transparency of their accounting practices because of the substantial impact that accounting information has on market price.

FAIR VALUE ACCOUNTING: BENEFITS, CHALLENGES AND IMPLICATIONS FOR FINANCIAL REPORTING

This research paper delves into fair value accounting, exploring its benefits, challenges, and implications for financial reporting. Beginning with its significance and contrast to historical cost accounting, it navigates through its role in global reporting standards. The benefits of transparency, relevance and informed decision-making are weighed against challenges such as subjectivity, volatility's impact, illiquid asset valuation complexity and the potential for manipulation. The effects of fair value on financial statements, disclosure, ratios and valuation are scrutinized. The regulatory framework's intricacies, regulatory responses and global harmonization efforts are assessed. This research paper's concluding reflection underscores fair value's evolving importance in a dynamic financial landscape, emphasizing the need for on-going vigilance and adaptation.

Sustainability Reporting and Financial Performance of Quoted Oil and Gas Companies in Nigeria

This study empirically investigated the relationship between sustainability reporting and financial performance of quoted manufacturing companies in Nigeria. To achieve this objective, theoretical, conceptual, and empirical literature on sustainability reporting on financial performance were exhaustively reviewed. The population of the study consists of twelve quoted oil and gas companies on the Nigerian stock exchange. The study adopts purposive sampling techniques to select ten quoted oil and gas companie s as the sample size. Secondary data were obtained from audited financial reports and sustainability reports of quoted oil and gas companies in Nigeria from 2013-2022. Hypotheses formulated were tested using ordinary least square regression with the aid of Eview 10 econometrics statistical software. The findings show that sustainability reporting had a significant impact on financial performance of quoted oil and gas companies in Nigeria. Empirical evidence suggests that environmental sustainability reporting had a significant relationship with return on equity and return on asset of quoted oil and gas companies in Nigeria. Empirical evidence indicates that social sustainability reporting had a significant relationship with return on equity and return on asset of quoted oil and gas companies in Nigeria. Empirical evidence reveals that economic sustainability reporting had a significant relationship with return on equity and return on assets of quoted oil and gas companies in Nigeria. The study concludes that sustainable reporting promotes value creation, brand reputation, attracts investors, lowers operational costs, and improves risk management, leading to superior financial performance. The study recommends, among others that corporate organizations should adopt widely recognized international sustainability reporting standards, such as the global reporting initiative, the task force on climate-related financial disclosures, and the sustai

A Review of Environmental, Social and Governance (ESG) Regulatory Frameworks: Their Implications on Malaysia

The increasing emphasis on sustainability has led many nations to introduce ESG-related regulatory frameworks. These frameworks aim to regulate and guide financial investments based on the ESG performance of companies while ensuring transparency to prevent the manipulation of sustainability-related information concerning investment products. This article reviews the regulatory and disclosure frameworks implemented in different nations and regions to identify their key components. The review reveals that these regulatory frameworks capture the environmental aspects encompassing climate change adaptation and mitigation, identification, evaluation and management of climate risks, circular economy practices, and pollution prevention. They also cover the social aspects, which include community development, employee welfare, and human rights. Additionally, governance aspects comprising anti-corruption measures, diversity within company boards and management, and the implementation of due diligence were included. The increased emphasis on transparency underscores the importance of disclosure. In this regard, the disclosure frameworks largely align with the recommendations of the Task Force on Climate-related Financial Disclosures, which cover governance, strategies for identifying and assessing risks and opportunities, their impacts on a company's finances and operations, resilience-building through scenario analyses, risk management integration with the overall organizational risk management, and the use of metrics and targets to measure performance. Malaysia could benefit from adopting comprehensive regulatory and disclosure frameworks that address ESG holistically, with elements related to the circular economy and dual materiality included in the frameworks. Future studies could focus on standardizing the development of metrics and targets to facilitate performance comparisons.

Effect of financial performance and disclosure of carbon emissions on Environmental Performance with Good Corporate Governance as a moderation variable

This study aims to examine the effect of financial performance and carbon emissions disclosure on environmental performance, and to examine the role of good corporate governance in moderating this relationship. This study uses quantitative methods with secondary data in the form of annual reports of non-financial companies listed on the Indonesia Stock Exchange in 2019-2021. The sample was determined using purposive sampling method and produced 132 samples. The results of this study indicate that financial performance has a positive and significant effect on environmental performance, and disclosure of carbon emissions has a positive and significant effect on environmental performance. However, good corporate governance cannot moderate the relationship between financial performance and carbon emission disclosure on environmental performance.