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Review of Managerial Science

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23.10.2019 | Original Paper

Corporate non-financial disclosure, firm value, risk, and agency costs: evidence from Italian listed companies

verfasst von: Fabrizio Rossi, Maretno Agus Harjoto

Erschienen in: Review of Managerial Science | Ausgabe 5/2020

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Abstract

This study examines the relationship between corporate non-financial disclosure ratings, the Italian Legislative Decrees 231/2001 and 254/2016, and three outcomes of Italian listed firms: performance, risk and agency cost. Based on stakeholder–agency theory, this study conceptualizes the role of firms’ non-financial disclosures in reducing asymmetric information and agency costs between managers and broad stakeholders. Utilizing the Standard Ethics Rating (SER) as a measure of firms’ non-financial disclosure rating, this study finds that SER ratings are positively related to firm value and are negatively related to firms’ risk and agency costs. This study also provides evidence that the adoption of Italian Legislative Decrees 231/2001 and 254/2016, along with external verifications from the SER of firms’ non-financial disclosure, has a positive impact on firm outcomes. Corporate managers and investors should recognize the value added from regulations that foster non-financial disclosures and ratings issued by an independent rating agency (e.g., Standard Ethics) as they both enhance firm performance and reduce risk and agency costs.

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Available at https://tcdata360.worldbank.org/indicators/h2e15b0d6.

We find that the ordinal value of SER (ETHICRATE variable) is positively correlated with the likelihood of a firm having a GRI rating (0.36) and Bloomberg ESG disclosure score (0.32). We also find that our multivariate regression results using GRI rating are similar with those using the SER ordinal rating (see Table 6 and Sect. 5).

See http://standardethicsrating.eu/images/Documents/1._Sustainability_Rating_definitions_Guide_2018_1.pdf for detail ordinal rating from the SER.

We also check the robustness of our results using the Global Reporting Initiative (GRI) rating instead of the SER ordinal rating (see Sect. 5).

We also collected the Bloomberg environmental, social and corporate governance (ESG) scores for firms in our sample. However, Bloomberg only started collecting ESG scores in 2005 (Grewal et al. 2017). As a consequence, we cannot conduct the same analyses as Tables 3, 4, 5, especially the interaction term between Decree 231/2001 and the firm ESG scores. We checked the correlation coefficient between Bloomberg ESG and SER ordinal rating from 2005 to 2018 and we find that they are positively (0.32) and significantly correlated.

All untabulated robustness tests results are available upon request.

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Titel: Corporate non-financial disclosure, firm value, risk, and agency costs: evidence from Italian listed companies
verfasst von: Fabrizio Rossi
Maretno Agus Harjoto
Publikationsdatum: 23.10.2019
Verlag: Springer Berlin Heidelberg
Erschienen in: Review of Managerial Science / Ausgabe 5/2020
Print ISSN: 1863-6683
Elektronische ISSN: 1863-6691
DOI: https://doi.org/10.1007/s11846-019-00358-z

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