Sustainability Disclosure, Dominant Owners and Earnings Informativeness

37 Pages Posted: 24 Aug 2014

See all articles by Carolina Bona‐Sánchez

Carolina Bona‐Sánchez

University of Las Palmas de Gran Canaria

Jerónimo Pérez Alemán

Universidad de Las Palmas de Gran Canaria

Domingo J. J. Santana‐Martín

University of Las Palmas de Gran Canaria

Date Written: July 15, 2014

Abstract

Focusing on an environment where ownership concentration is prevalent and where sustainability disclosure is not a new phenomenon, we show that communication via social responsibility reporting has a positive effect on earnings informativeness. Moreover, this positive effect is greater as the dominant owner’s voting-cash flow wedge increases. We use the Global Reporting Initiative (GRI) guidelines to proxy for sustainability disclosure. Our results are consistent with insiders’ legitimacy threats and/or reputation concerns driving sustainability disclosure. To the extent that market participants interpret this reporting policy as leading to increased long-term value for the firm, sustainability reporting would be expected to positively affect earnings informativeness. Thus, the findings highlight the importance of sustainability reporting in reducing information asymmetries between dominant owners on the one side and minority shareholders and other relevant stakeholders on the other, particularly in those firms where dominant owners show a voting-cash flow wedge.

Keywords: voting-cash flow wedge, earnings informativeness, sustainability disclosure, dominant owners.

JEL Classification: G34, M14, M41

Suggested Citation

Bona Sánchez, Carolina and Perez Aleman, Jeronimo and Santana-Martín, Domingo J., Sustainability Disclosure, Dominant Owners and Earnings Informativeness (July 15, 2014). Available at SSRN: https://ssrn.com/abstract=2485450 or http://dx.doi.org/10.2139/ssrn.2485450

Carolina Bona Sánchez

University of Las Palmas de Gran Canaria ( email )

C/Juan de Quesada, No. 30
Las Palmas de Gran Canaria, Las Palmas 35017
Spain

Jeronimo Perez Aleman (Contact Author)

Universidad de Las Palmas de Gran Canaria ( email )

C/Juan de Quesada, No. 30
Las Palmas de Gran Canaria, Las Palmas 35017
Spain

Domingo J. Santana-Martín

University of Las Palmas de Gran Canaria ( email )

C/Juan de Quesada, No. 30
Las Palmas de Gran Canaria, Las Palmas 35017
Spain

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