The Real Effects of Mandatory Nonfinancial Disclosure: Evidence from Supply Chain Transparency

Guoman She

143 citations0/0 files storedThe Accounting Review

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Corporate Social Responsibility Reporting Auditing, Earnings Management, Governance Corporate Law and Human Rights

Abstract

ABSTRACT This paper studies whether and how mandatory nonfinancial disclosure affects firms' real decisions. I exploit a disclosure regulation enacted in California, which mandates that firms disclose how they conduct due diligence to address their suppliers' human rights abuses. I find that treated firms increase their supply chain due diligence, and their suppliers' human rights performance improves following the regulation. The effects are stronger when firms face greater pressure from non-governmental organizations (NGOs) and socially conscious shareholders, when customers have greater incentives to use the newly disclosed information, and when the regulation leads to a larger increase in information comparability. Collectively, the results suggest that mandatory nonfinancial disclosure can affect firms' real decisions through market mechanisms and that stakeholder responses play a key role. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G14; G18; G38; J80; K22; K31; K38; L23; M41; M48.

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References

2010Voluntary Nonfinancial Disclosure and the Cost of Equity Capital: The Initiation of Corporate Social Responsibility Reporting 2017Social Capital, Trust, and Firm Performance: The Value of Corporate Social Responsibility during the Financial Crisis 1983Discretionary disclosure 1981Good News and Bad News: Representation Theorems and Applications 2018Do institutional investors drive corporate social responsibility? International evidence 2013The Impact of Corporate Social Responsibility on Firm Value: The Role of Customer Awareness 1981The Informational Role of Warranties and Private Disclosure about Product Quality 2009Individual and Corporate Social Responsibility

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2023Transmission Effects of ESG Disclosure Regulations Through Bank Lending Networks 2023Sustainability Reporting: A Financial Reporting Perspective 2022Consequences of CSR reporting regulations worldwide: a review and research agenda 2023A review of supply chain transparency research: Antecedents, technologies, types, and outcomes 2023The multiverse of non-financial reporting regulation

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