Disclosure in Non-Financial Reports as Strategic Leverage: Can it Increase Firms’ Value?
2nd OFEL Conference 2014
Posted: 30 Jan 2014
Date Written: December 14, 2013
Over the last years, stakeholders’ pressures over sustainability issues have increased dramatically. Organizations have to demonstrate the inclusion of social and environmental concerns in their operative and strategic decisions processes. For this reason, companies report their sustainability performance in non-financial documents, signaling to markets and stakeholders the outcomes of their CSR policies. As non-financial reporting is a voluntary activity, there is not a common and enforced standard of reporting rules: as a result, the level of disclosure varies from one report to another. Sound and material reporting, with a higher level of disclosure, is a costly activity, requiring large investments in terms of time and resources. Therefore, CSR managers have to determine the grade of disclosure of non-financial reports by evaluating their costs and benefits. The aim of this is paper is to determine whether the market remunerates this investment and if it rewards higher levels of disclosure, providing both managerial and academic implications. This paper analyzes the outcomes on companies’ market value determined by non-financial disclosures strategies in GRI referenced reports, juxtaposing a partial disclosure stance against a full disclosure stance, through a 2 years longitudinal study of the 2012 Fortune Global 500 companies. Results show that while the issuance of a GRI referenced report with partial disclosure (C and B GRI Application Levels) causes a positive effect on market capitalization, a full disclosure stance (A and A GRI Application Levels) has a negative effect on market value in the period of analysis. This output suggests that there is an optimum level of disclosure perceived by the market, opening a debate over the quality of disclosure and its ability to satisfy stakeholders’ informative needs.
Keywords: level of disclosure, corporate social responsibility, market value, GRI, non-financial reports
JEL Classification: M4, M1
Suggested Citation: Suggested Citation