Non-financial Information Research Articles

Market reactions to timing and information of mandatory disclosures

PurposeThis study examines whether investors value the timing and/or information of mandatory disclosures in a unique research setting of listed companies in Thailand.Design/methodology/approachThe authors adopt an event-study based approach. Abnormal stock returns are calculated using an OLS market model to measure market reactions to three types of mandatory reports issued by listed Thai firms: financial statements, Form 56-1 and Form 56-2. These reports are released sequentially but contain overlapping information content. Multivariate regression models are employed to examine the market reactions to these regulatory reports and explore the characteristics of firms that affect the market response.FindingsThe stock market reacts differentially to these reports. The financial statements, which are filed the earliest and are the most concise, prompt the strongest reaction. Investors similarly react significantly to Form 56-1 and Form 56-2, although Form 56-2 provides additional information beyond Form 56-1. The market reactions to small firms are stronger. Collectively, equity investors focus on the timeliness of disclosures rather than the information disclosed in the mandatory reports.Practical implicationsThe evidence provides support for ongoing regulatory initiatives aimed at improving the timeliness of mandatory disclosures in emerging economies.Originality/valuePrior studies on disclosure regulation investigate either the effect of information content or the timing of mandatory disclosures in isolation. The authors differentiate the effect of information content from disclosure timing and extend the literature by suggesting that investors incrementally value timeliness of disclosures. Investors perceive the benefit of the timely release of quantitative information compared to subsequent narrative disclosures. Between Form 56-1 and Form 56-2, the earlier release of the narrative non-financial information is incrementally traded into share prices.

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.

THE EFFECT OF CORPORATE GOVERNANCE MECHANISMS ON INTEGRATED REPORTING: A STRUCTURAL EQUATION MODELLING (SEM) APPROACH

This study investigates the level of integrated reporting of Malaysian listed companies and explores the potential effects of corporate governance mechanisms on integrated reporting. The annual reports of 150 companies listed on the main market, Bursa Malaysia, for the year ended 2014 were examined to analyze the companies' integrated reporting practices using content analysis. An integrated reporting index was constructed following the key elements of the integrated reporting framework established by the International Integrated Reporting Committee (IIRC). The study considered four corporate governance mechanisms: board composition, board size, board diversity, and ownership structure. The study used Multiple regressions to measure the impact of corporate governance mechanisms on the companies' integrated reporting initiatives. Structural Equation Modelling (SEM) was used to measure the effect of corporate governance mechanisms on the level of the companies' integrated reporting. The results showed that Malaysian companies' reporting of financial and non-financial information has not yet been integrated. Based on SEM analysis, the results indicated that only one variable, namely, the board size, was associated with the extent of integrated reporting. Board size was the most significant variable that influenced the level of integrated reporting of Malaysian public listed companies in 2014. The study contributes to the integrated reporting literature. It presents empirical evidence that corporate governance mechanisms influence companies' disclosure of integrated reporting information and, thus, providing additional data or information that will be significantly helpful for other researchers. The study will also stimulate the interest of academics in research activities concerning the characteristics of corporate governance mechanisms on integrated reporting activities. The findings are limited to the context of the study. It only looks at corporate governance mechanisms as a critical driver of integrated reporting and uses only the annual report disclosures from a single year.

Corporate Environmental Reporting for Achieving Environmental Sustainability: Evidence from Real-estate, Engineering, and Automobiles Industry

This study intends to investigate the companies’ environmental reporting disclosure practices. To achieve the research aim, we have developed ‘Environmental Risk Reporting Practices Index for Engineering Industry (ERRPIEI) which includes environmental, energy, waste, water, biodiversity, and supply chain management and design. Additionally, the ‘Environmental Risk Reporting Practices Index for Services and Real Estate (ERRPISE)’ has been developed by authors that include strategy and governance toward environmental sustainability, reduction, and optimization initiatives, communicating and joining the collective effort, different metrics, and environmental sustainability reporting. Simultaneously, these two indexes are made up of 114 index items. Data is accumulated from 46 companies operating in two different sectors namely engineering (automobile), services, and real estate for the year 2021-2022 from Dhaka Stock Exchange (DSE), Bangladesh. The study revealed that the overall scoring of index items is very petite, with companies providing very insufficient and inappropriate non-financial information, most of the companies scored zero in all our disclosure items. Furthermore, the services, and real estate industry is disclosing more index items on environmental issues than the engineering industry. This study will contribute to the standing literature on highlighting corporate environmental reporting aspects of annual reports as well as providing some insights on the environmental reporting and disclosures to the concerned policy-makers for taking efforts and initiatives for adapting to climate change and securing sustainable development which leads to achieving overall environmental sustainability.

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.

Harmonizing non-financial information of business enterprises in the European Union and Ukraine

Apart from financial statements, business enterprises make and submit non-financial reporting regulated by several Directives of the European Union (EU), national law of EU member states and Ukraine. Recently these normative documents required amendments, because users of non-financial reporting were concerned with a broader range of supplementary information. It covers company’s goals and strategies; environmental sustainability; extension of the responsibility of company management and top administrative staff for the assurance of sustainability; the concept of materiality and its analysis; the assessment of risks specific to sustainability, affecting the performance of company and having indirect adverse effects for community and environment; the disclosure of information on intangible assets (human, intellectual and social capital); research, development and innovation; social responsibility before employees, respect to human rights and fighting with corruption and bribery. Therefore, the EU Council approved the Corporate Sustainability Reporting Directive. The information disclosure in non-financial report was made the exclusive responsibility of business enterprise management, and it depends on the specific of national law and business activities of an enterprise. Bearing this in mind, the procedure for the compilation of non-financial report was developed, with clarifying the issues that required consideration: structuring of non-financial reporting; setting up the indicators of financial and non-financial reporting; collection of data and estimation of results; preparation, monitoring and presentation of the report. The proposed structuring is meant to help a business enterprise focus on urgent issues of non-financial reporting, first and foremost on highlighting its market sustainability and sustainable development perspectives. A set of indicators characterizing non-financial reports is proposed: ratio of competition intensity, ratio of market advantage, overall index of labor productivity, index of turnover of goods, works and services. Clarifications are made in the basic terminology: non-financial information, non-financial reporting, sustainable development, integrated reporting, and corporate reporting. They help make the procedure for monitoring of non-financial reporting regular and transparent for users.

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.

Integrated reporting in the public sector – special focus on portuguese public university

Sustainability reporting began to emerge in the 1990s, with the aim of providing stakeholders with information on the company's performance through social, governance and environmental aspects (Eccles and Spiesshofer, 2017). The relevance of non-financial information has grown significantly, as more and more investors argue that financial information is not enough to understand the performance and value of the organization. At a time when companies want greater transparency, it is necessary that social justice and environmental protection are increasingly a reality. Information users, on the other hand, are more aware of the need to promote sustainable long-term profitability. Focusing on universities, these are essential pillars of society. Its main mission includes two main aspects, which are teaching and research; however, these entities were also called upon to contribute to society through the provision of services, their third mission. Do all public universities in Portugal produce sustainability reports? Or will it just be a few? The aim of this study is to carry out a survey of the accounts of these institutions, to assess whether they include sustainability reports, through which they convey to stakeholders their practices in this area.

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.

Investigating the Factors That Determine the ESG Disclosure Practices in Europe

The increased focus on environmental (E), social (S), and governance (G) (ESG) disclosure has become a necessary step toward the integration of sustainability practices into firms’ culture to meet the expectations of stakeholders. The social and environmental implications of firm activities on the environment and surrounding communities have led to the growing demand for useful non-financial information. This paper investigates the impacts of the board’s corporate social responsibility (CSR) strategy and CSR orientation, GRI, and the country–cultural dimensions, based on Hofstede’s measures of ESG disclosure practices within Europe. Using a European dataset from Bloomberg and Refinitiv Eikon, this paper adopts a quantitative research methodology to test the research hypotheses through a statistical analysis of 7840 observations from European companies to analyze the extent of the relationship between micro- and macro-variables and the disclosure of company ESG. Our findings suggest that both board CSR orientation and strategy and the GRI have positively and significantly affected the overall disclosure of ESG practices within Europe. When examining country–cultural dimensions, we find that individualism and feminine cultures are positively associated with increased levels of ESG disclosure. Our findings shed light on factors affecting ESG disclosure practices within Europe and could be of interest to companies, policy makers, and other stakeholders.

RELATIONSHIP BETWEEN LEAN ACCOUNTING AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN ELDORET TOWN, KENYA

<p>Everybody working seriously to implement Lean Accounting concept in their company eventually bumps up against their accounting systems. It soon becomes clear that traditional accounting systems are actively anti-lean. Lean accounting refers to the concepts designed to better reflect the financial performance of a company that has implemented lean service processes. These may include organizing costs by value stream, changing inventory valuation techniques and modifying financial statements to include nonfinancial information (Alves, Vieira Neto, de Mattos Nascimento, de Andrade, Tortorella, & Garza-Reyes, 2022). The study sought to establish whether Lean Accounting influences the financial performance of Commercial Banks in Kenya. The study was guided by the Lean Philosophy model. The study used a cross-sectional research design and targeted employees working in all t8 commercial banks in Eldoret town, Kenya. A census of the study population was conducted. Questionnaires were used as data collection instruments. The data was analyzed using both inferential (multiple regression and correlation) and descriptive statistics (frequencies, percentages, mean and standard deviation) and was presented by the use of tables and charts. The study findings indicated that the study variables Lean Accounting β = 0.209, p < 0.05 were significant to financial performance. The results showed that Lean Accounting was a positive and significant predictor of financial performance with (t = 3.250; ρ < 0.05). The study recommended that the management of commercial banks in Kenya should strive to maintain the current lean accounting practices and further increase or improve them in order to enhance the banks’ value. They should also train staff on the use of Lean Accounting techniques in order to be able to improve their performance. </p><p><strong>JEL</strong>: G20; G21; M40</p>

Integrated reporting, audit quality: presence of environmental auditing in an international context

PurposeThis paper aims to investigate the effect of audit quality and environmental auditing on integrated reporting and the effect of environmental auditing on audit quality.Design/methodology/approachData was collected from a sample of 300 international companies during the period 2010–2019. The author collected the data from the Thomson Reuters Eikon database, sustainability reports and annual reports. A multiple regression analysis was performed to test the hypotheses.FindingsThe finding of this study confirms a positive and significant relationship between audit quality and integrated reporting. It is also found that environmental auditing has a positive and significant effect on integrated reporting. Thus, this study found a positive and significant relationship between environmental auditing and audit quality.Practical implicationsThe findings in this paper identify strategies for improving integrated reporting as a crucial element in the processing of financial and nonfinancial information, to help managers and investors and shareholders take a long-term perspective. Therefore, the results encourage companies to invest in economic, environmental and social aspects. This enables accounting professionals, stock exchange authorities and users of environmental and social information to be aware of the factors associated with environmental reporting, to improve the efficiency of those producing the audit service.Originality/valueThe originality of this study lies in its consideration of a particular aspect of auditing, namely, environmental auditing. However, despite the large body of research on auditing and integrated reporting, to the best of the author’s knowledge, this is the first study to examine the relationship between environmental auditing and integrated reporting. Furthermore, in this research, the author has emphasized the importance of the role played by environmental auditing on audit quality. This design has been neglected in previous studies. Finally, the choice of the field of investigation for the reliability of the data used and the generalization of the results obtained, enables us to make important contributions to the user of the information.

An Analysis of the Readability of the Chairman’s Statement in South Africa

Board members and the chairman of the board must provide shareholders and other stakeholders with annual reports that include the chairman’s statement. The statement provides an important message to stakeholders concerning financial performance, non-financial information and future outlook of the company. Stakeholders are concerned about the transparency and usefulness of the disclosed as this would have an impact on whether the chairman’s message is readable or not. The purpose of this study is to evaluate whether messages from the chairman of the board are readable or not. A sample of 40 Johannesburg Stock Exchange listed companies, for the financial period ending 2021, was selected to meet the study objectives. The Gunning Fog Index (Fog index) was applied to assess the readability of the chairman’s statement. The study found that it was difficult to read the chairman’s statements for the selected corporations and South African companies.

Analysis of the Limitations of Chinese Enterprises' Financial Statements and Countermeasures

Financial statement analysis bases on financial statements and other information, using special analytical tools and methods to systematically analyze and evaluate the past and present operating results and financial position of an enterprise. It also predicts the future development trend of the enterprise and provides valuable information for decision-making to reduce uncertainty in decision-making. The current financial statements have limitations in the financial statements themselves, including the lack of non-financial information, the lagging nature of the financial statements, accounting policies, optional accounting treatments and subjective estimates by accountants. In terms of financial analysis indicators, some of the solvency indicators and operating capacity indicators have limitations. In terms of financial analysis methods, the comparative analysis method, factor analysis method and trend analysis method all have certain limitations. These limitations are discussed and analyzed in this paper. Suggestions are also made on the financial statements themselves, the indicators to be analyzed in the financial statements and the methods of financial analysis.

Value Relevance of Environmental Sustainability Information Disclosure

To empirically investigate the value relevance of environmental sustainability information disclosure of listed oil and gas firms in Nigeria, this study made use of Ohlson 1995 Valuation Model and a fifteen (15) year time period beginning from year 2006 to year 2020. Further, the study applied carbon emission information disclosure data as the non-financial information and hypothesized that carbon emission information disclosure is value irrelevant in Nigeria. In this study, ex-post facto and descriptive research design based on a panel data set secondarily sourced from annual financial reports of eight (8) listed oil and gas firms in Nigeria was employed. Robust least square regression analysis technique was employed to test the formulated hypotheses. Results obtained from the descriptive statistics reflects a poor carbon emission reporting situation in Nigeria. The result reveals that on average about 2% of the sampled firms disclosed information relating to carbon emission during the period under study. Specifically, the notion that investors perceive the control of carbon emission as severe cost rather than profit was established. This is due to the outcome from the regression result which suggest that stock market investors reactions towards carbon emission disclosure of oil and gas firms in Nigeria is negative. However, this study recommends that to relieve such negative consequences in the capital market, managers of oil and gas firms in Nigeria must take appropriate action to communicate their commitments and efforts genuinely and adequately around carbon reduction to investors. This study contributes to the growing field of environmental sustainability accounting, particularly from a market that is underdeveloped like Nigeria, by offering empirical evidence relating to the relevant value of carbon emission reporting with practical financial implications that will be most helpful to investors.

Climate Change and Corporate Governance in Spain

This paper addresses the impact of climate change as one of the sustainability factors in the governance of listed companies in Spain. The phenomenon of the fight against climate change is observed inserted in the broader framework of sustainability while it is analyzed and integrated from the point of view of corporate governance in relation to the long-term perspective of the company, non-financial information, corporate purposes and the remuneration of the members of the board of directors, without forgetting to illustrate these issues from the corporate perspective of Spain. The work is framed in the so-called sustainable corporate governance where the fight against climate change takes on a special role.

THE IMPACT OF SUSTAINABILITY ASSURANCE AND PERSONALITY CHARACTERISTICS ON INVESTMENT DECISION-MAKING IN SOCIAL RESPONSIBILITY INVESTING

Assurance reporting for non-financial information, such as sustainability reporting, is no longer guaranteed for quality, which led to differences in individual investors’ investment decision-making regarding social responsibility investing (SRI). This is mostly due to the report’s relative novelty and the unregulated nature of practices reported by the company. While professional accountants play a major role in the assurance market, other professionals also contribute to the overall proportions. Hence, this study endeavours to extend the literature on the type of assuror and the level of assurance by examining how they influence individual investment decision-making when they attempt to achieve the best environmental goals for their investment funds through the evaluation of environmental reporting assurance options. The goal of the study is to propose a conceptual model from the individual investors’ point of view, and evaluate the role of personal characteristics by using the Big Five Inventory (BFI) measurement as a possible moderator between the types of assurors and the level of assurance in decision-making.

Opportunities and challenges of integrated report based on the principles of dialogic accounting and the engagement of stakeholders

The study aimed to identify the opportunities and challenges in the development of Integrated Reporting based on the principles of dialogic accounting and to analyze the elements related to engagement with stakeholders. An analogy was made between the principles of dialogic accounting and integrated reporting and a content analysis in the reports evidenced by the Banco Nacional de Desenvolvimento, referring to the years 2018 to 2020. The following opportunities were identified: engagement with stakeholders, provision of accounts and transparency and improved dialogue. And as challenges: understanding the content. Furthermore, it was understood that the bank appreciates the engagement with its stakeholders and presents non-financial information providing a scenario for the development of dialogic accounting and integrated reporting.