Articlehybrid2021

Performance and (non) mandatory disclosure: the moderating role of the Directive 2014/95/EU

Sebastiano Cupertino · Gianluca Vitale · Pasquale Ruggiero

35 citations0/0 files storedJournal of Applied Accounting Research

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Corporate Social Responsibility Reporting Auditing, Earnings Management, Governance Corporate Governance and Financial Management

Abstract

Purpose This paper investigates whether and how Directive 2014/95/EU affects financial performance as well as its moderation effect on the relationship between financial and non-financial performance, involving different stakeholders' perspectives. Design/methodology/approach We adopted the panel data approach to perform random effects regression analysis on a sample of 435 European listed non-financial companies, considering a timeframe of six years. Furthermore, the moderation effect of the Directive 2014/95/EU on the relationship between financial and non-financial performance has been tested. Findings NFD regulation negatively affects firms' operating profitability and shareholder value while produces no effects on debtholders' returns. Nevertheless, the Directive 2014/95/EU has general positive moderating effects on the relationship between non-financial and financial performance, mitigating the direct costs induced by pursuing non-financial performance. Research limitations/implications Shifting from mimetic to coercive isomorphism caused a strengthening of the complementarity between financial and non-financial performance dimensions, extending the concept of performance itself. The analysis carried out is limited to a short-term timeframe and on non-financial companies subject to the Directive 2014/95/EU. Practical implications The paper highlights trade-offs between the costs induced by non-financial activities and the benefits of being compliant with the non-financial disclosure (NFD) regulation, supporting managers in allocating business resources. Originality/value This paper is among the first that investigates the impact of mandatory NFD on the relationship between non-financial and financial performance. It is also one of the earliest in finding some pieces of evidence on the direct impact of Directive 2014/95/EU on EU companies' financial performance.

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References

1983The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields 2004The iron cage revisited institutional isomorphism and collective rationality in organizational fields 2007The Social Responsibility of Business Is to Increase Its Profits 1983The Iron Caged Revisited : Institutional Isomorphism and Collective Rationality in Organizational Fields 2003Corporate Social and Financial Performance: A Meta-Analysis 2000Corporate social responsibility and financial performance: correlation or misspecification?2001Shareholder value, stakeholder management, and social issues: what's the bottom line?2006Corporate Social Performance and Stock Returns: UK Evidence from Disaggregate Measures

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