Why Do Firms in Emerging Markets Report? A Stakeholder Theory Approach to Study the Determinants of Non-Financial Disclosure in Latin America
Abstract
:1. Introduction
2. Theory and Hypotheses Development
2.1. Stakeholder Theory and Non-Financial Disclosure
2.2. Stakeholder Theory and Non-Financial Disclosure in Emerging Markets
2.3. Stakeholder Theory and Non-financial Disclosure in Latin America
2.3.1. Firm Size
2.3.2. Profitability
2.3.3. Leverage
2.3.4. Degree of Internationalization
2.3.5. Market-to-Book Ratio
2.3.6. Systematic Risk
2.3.7. Industry Membership
2.3.8. Regulatory Quality
3. Methodology
3.1. Data Sources and Sample
3.2. Model and Measures
3.2.1. Dependent Variable
3.2.2. Independent Variables
3.2.3. Control Variables
3.3. Pre-Estimation Considerations
4. Results
5. Discussion
6. Conclusions
Author Contributions
Funding
Conflicts of Interest
Appendix A
Determinant | Power Type | Rationale | Some Supporting NFD Literature | |
---|---|---|---|---|
Firm size | Coercive | Larger firms are more visible and thus heavily scrutinized by information-seeking stakeholders, who could coerce companies into engaging in NFD. | Belkaoui and Karpik [57]; Cormier et al. [20]; Gamerschlag et al. [21]; Gray et al. [9]; Haddock-Fraser and Fraser [23]; Ho and Taylor [10]; Kolk [17]; Lee [19] | Liu and Anbumozhi [26]; Prado-Lorenzo et al. [15]; Reverte [12]; Roberts [13]; Skouloudis et al. [7]; Tagesson et al. [44]; Thorne et al. [14] |
Utilitarian | Bigger firms have a greater dependence on other stakeholders, and also a larger impact on society. NFD occurs as a mechanism to dialogue with these stakeholders. | |||
Profitability | Utilitarian | If managers have the ability to achieve superior performance, then they also have the skill to disclose NFD. Profitable companies have slack resources to respond to more stakeholder demands, including NFD. | Belkaoui and Karpik [57]; Gamerschlag et al. [21]; Hahn and Kühnen [3]; Ho and Taylor [10]; Muttakin and Khan [27] | Ortas et al. [55]; Prado-Lorenzo et al. [15,52]; Reverte [12]; Roberts [13]; Skouloudis et al. [7]; Tagesson et al. [44] |
Leverage | Utilitarian | For highly leveraged companies, creditors are a powerful stakeholder because debt-holders are interested in ESG information to assess non-financial risks. As a response, firms engage in NFD to reduce the cost of capital. | Belkaoui and Karpik [57]; Ho and Taylor [10]; Kansal et al. [25]; Prado-Lorenzo et al. [15]; Ortas et al. [55] | Reverte [12]; Roberts [13] |
Degree of internationalization | Coercive | As companies go international, they are visible to a greater number of stakeholders that could pressure them to engage in NFD. | Echave and Bhati [22]; Gamerschlag et al. [21]; Hahn and Kühnen [3]; Ho and Taylor [10]; Kolk [17] | Lokuwaduge and Heenetigala [6]; Muttakin and Khan [27]; Reverte [12] |
Utilitarian | NFD could be a tool to present themselves as a good corporate citizen internationally, and hence, enter new markets. | |||
Market-to-book ratio | Utilitarian | A high market-to-book ratio could entail information asymmetries, and investors could require NFD in order to reduce these differences. | Goettsche et al. [24]; Hahn and Kühnen [3]; Prado-Lorenzo et al. [52] | |
Systematic risk (beta) | Utilitarian | Firms in risky markets are generally more visible, and thus, they have incentives to signal stakeholders a good public image. NFD might help in this endeavor. | Belkaoui and Karpik [57]; Cormier et al. [20]; Hahn and Kühnen [3]; Kansal et al. [25] | |
Industry membership | Coercive | Extractive sectors, due to their enhanced socio-environmental impact, are subject to a higher stakeholder scrutiny. This increases the likelihood of NFD. | Gamerschlag et al. [21]; Gray et al. [9]; Haddock-Fraser and Fraser [23]; Ho and Taylor [10]; Kansal et al. [25]; Kolk [17]; Liu and Anbumozhi [26] | Lokuwaduge and Heenetigala [6]; Muttakin and Khan [27]; Prado-Lorenzo et al. [15,52]; Reverte [12]; Roberts [13]; Skouloudis et al. [7] |
Regulatory quality | Coercive | Governments and regulatory bodies can affect companies through political interference. NFD acts as a tool to show that the firm is being properly managed in ESG terms, and government influence is not necessary. | Gray et al. [9]; Hahn and Kühnen [3]; Ho and Taylor [10]; Kolk [17]; Liu and Anbumozhi [26] | Prado-Lorenzo et al. [15]; Reverte [12]; Roberts [13] |
Appendix B
Argentina | Brazil | Chile | Colombia | Mexico | Peru | Total | |
---|---|---|---|---|---|---|---|
Consumer discretionary | 5 | 24 | 34 | 7 | 13 | 18 | 101 |
Consumer staples | 1 | 7 | 32 | 9 | 9 | 8 | 66 |
Energy | 3 | 7 | 2 | 4 | 6 | 22 | |
Financials | 8 | 44 | 46 | 10 | 24 | 71 | 203 |
Health care | 8 | 4 | 2 | 2 | 1 | 17 | |
Industrials | 6 | 18 | 31 | 8 | 7 | 23 | 93 |
Information technology | 5 | 1 | 6 | ||||
Materials | 5 | 6 | 20 | 13 | 6 | 18 | 68 |
Telecommunication services | 2 | 2 | 1 | 1 | 1 | 7 | |
Utilities | 4 | 12 | 21 | 7 | 16 | 60 | |
Total | 32 | 133 | 193 | 61 | 62 | 162 | 643 |
Appendix C
1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | |
---|---|---|---|---|---|---|---|---|---|---|
1. Assets | 1 | |||||||||
2. Revenue | *** 0.883 | 1 | ||||||||
3. ROA | *** −0.069 | *** −0.037 | 1 | |||||||
4. ROE | * 0.027 | *** 0.068 | *** 0.655 | 1 | ||||||
5. Leverage | *** −0.335 | *** −0.268 | ** −0.035 | **−0.033 | 1 | |||||
6. DegInter | *** 0.732 | *** 0.847 | *** −0.061 | *** 0.055 | *** 0.066 | 1 | ||||
7. MBR | *** −0.106 | *** −0.082 | −0.009 | 0.014 | *** 0.232 | 0.012 | 1 | |||
8. Beta | ** 0.033 | *** 0.039 | −0.008 | −0.004 | −0.002 | *** 0.041 | −0.004 | 1 | ||
9. RegQ | *** 0.124 | *** 0.054 | −0.006 | *** 0.059 | ***−0.065 | *** 0.058 | * −0.023 | −0.012 | 1 | |
10. GDPPC | *** 0.055 | *** 0.043 | ** −0.029 | *** −0.050 | ** 0.029 | *** 0.088 | −0.007 | 0.007 | *** 0.629 | 1 |
Mean | 18.981 | 18.030 | 0.061 | 0.217 | 0.408 | 17.750 | 17.722 | 0.566 | 0.211 | 14.764.2 |
SD | 2.716 | 2.940 | 0.146 | 0.163 | 0.123 | 2.162 | 4.279 | 4.694 | 0.633 | 4379.99 |
Min | 5.298 | 4.441 | −0.453 | −0.739 | 0.039 | 3.993 | 1.27 × 10−6 | 0.107 | −0.468 | 7404.29 |
Max | 25.136 | 23.499 | 0.769 | 0.839 | 0.914 | 22.979 | 29.544 | 17.723 | 1.214 | 23,266.5 |
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Firm Size Measure | Dependent Variable (disclosure) | |||
---|---|---|---|---|
ESG | Environmental | Social | Governance | |
Assets | Model I.1 | Model II.1 | Model III.1 | Model IV.1 |
Revenue | Model I.2 | Model II.2 | Model III.2 | Model IV.2 |
Indep. Variables and Controls | Dependent Variable (disclosure) | |||||||
---|---|---|---|---|---|---|---|---|
ESG | Environmental | Social | Governance | |||||
Model I.1 | Model I.2 | Model II.1 | Model II.2 | Model III.1 | Model III.2 | Model IV.1 | Model IV.2 | |
Assets | 3.250 *** (0.251) | 1.415 *** (0.353) | 1.433 *** (0.350) | 1.470 *** (0.256) | ||||
Revenue | 2.686 *** (0.456) | 2.131 *** (0.346) | 2.206 *** (0.340) | 1.797 *** (0.283) | ||||
ROA | −0.021 (0.033) | −0.020 (0.017) | −0.002 (0.021) | −0.019 (0.015) | 0.002 (0.021) | −0.016 (0.016) | −0.027 * (0.014) | −0.032 ** (0.014) |
ROE | −0.004 (0.010) | −0.004 (0.007) | −0.009 * (0.005) | −0.010 * (0.133) | −0.013 * (0.007) | −0.014 ** (0.006) | 0.002 (0.007) | 0.001 (0.008) |
Leverage | −0.009 (0.012) | −0.003 (0.008) | 0.002 (0.009) | 0.005 (0.011) | 0.004 (0.008) | 0.008 (0.011) | −0.003 (0.006) | −5.94 × 10−4 (0.006) |
DegInter | 0.138 (0.1531) | –0.017 (0.1370) | 0.141 (0.1589) | –0.117 (0.1528) | 0.209 (0.1393) | –0.061 (0.1484) | 0.163 (0.1313) | –0.050 (0.1275) |
MBR | 0.001 (0.003) | −0.001 (0.005) | 0.002 ** (0.001) | 0.002 (0.002) | 0.002 ** (0.001) | 0.002 (0.002) | −2.53 × 10−5 (9.20 × 10−4) | −0.001 (0.001) |
Beta | 7.84 × 10−4 * (4.70 × 10−4) | 0.001 (0.006) | 4.34 × 10−4 * (2.16 × 10−4) | 9.05 × 10−5 (4.97 × 10−4) | 3.99 × 10−4 * (1.10 × 10−4) | 8.13 × 10−5 (4.81 × 10−4) | 4.16 × 10−4 (4.01 × 10−4) | −2.74 × 10−5 (5.47 × 10−4) |
Cons. disc. | 3.650 ** (1.485) | 1.090 * (0.717) | −0.189 (1.659) | 2.496 * (1.663) | −0.791 (1.590) | 3.263 * (1.776) | 0.901 (0.913) | 1.276 * (0.705) |
Cons. staples | 3.236 ** (1.466) | 1.510 * (0.909) | 0.771 (1.102) | 1.641 * (1.061) | 0.432 (1.067) | 2.074 * (1.044) | 1.560 * (0.889) | 0.651 (0.871) |
Energy | 0.426 (2.207) | 4.440 *** (1.480) | 0.173 (1.934) | 2.845 * (1.554) | 0.907 (1.856) | 3.748 ** (1.570) | 1.457 (1.640) | 3.807 ** (1.590) |
Health | 3.753 (2.380) | −1.881 (1.439) | 2.151 (1.651) | −0.336 (1.495) | 1.579 (1.643) | −0.978 (1.510) | 0.581 (1.516) | −1.989 (1.451) |
Indust. | 2.657 * (1.369) | 1.302* (0.786) | −1.554 (1.973) | 3.489 * (2.016) | −0.951 (1.411) | 2.882 ** (1.254) | 0.838 (0.854) | 1.027 * (0.700) |
Info. tech. | 13.183 *** (2.343) | 7.262 *** (1.880) | 5.878 *** (2.060) | 3.967 ** (2.016) | 6.959 *** (1.870) | 5.345 ** (2.069) | 7.032 *** (1.250) | 4.904 *** (1.303) |
Mat. | 4.940 *** (1.539) | 0.343 (0.991) | 3.112 *** (1.163) | 1.327 (1.040) | 2.606 ** (1.119) | 0.824 (1.012) | 1.632 * (0.968) | −0.458 (0.890) |
Telecom | 1.107 (4.677) | −1.397 (3.908) | 2.562 (2.502) | 0.503 (2.816) | 1.912 (2.578) | −0.288 (2.963) | 0.762 (2.572) | −0.824 (2.662) |
Utilities | 6.337 *** (1.977) | 3.546 *** (1.236) | 4.411 *** (0.935) | 3.367 *** (0.969) | 3.919 *** (0.899) | 2.805 *** (0.965) | 3.526 *** (0.806) | 2.477 *** (0.811) |
RegQ | 6.258 *** (1.091) | 5.174 *** (0.811) | 3.154 *** (0.685) | 2.825 *** (0.723) | 3.617 *** (0.696) | 3.385 *** (0.734) | 4.194 *** (0.625) | 4.044 *** (0.635) |
Local | 0.900 (1.141) | 1.008 (0.825) | 0.352 (0.849) | 0.684 (0.848) | 0.751 (0.887) | 1.114 (0.883) | 0.574 (0.698) | 0.806 (0.635) |
GDPPC | 16.983 *** (2.857) | 15.582 *** (2.484) | 9.274 *** (1.690) | 8.866 *** (1.702) | 9.536 *** (1.647) | 9.187 *** (1.645) | 11.657 *** (1.637) | 11.770 *** (1.732) |
Constant | −244.56 *** (35.764) | −211.36 *** (26.381) | −129.66 *** (18.484) | −133.89 *** (19.047) | −133.51 *** (17.948) | −139.22*** (18.466) | −152.24 *** (16.366) | −154.08 *** (18.932) |
Wald chi-squared | 159.13 *** | 181.61 *** | 132.40 *** | 138.83 *** | 147.90 *** | 142.65 *** | 212.08 *** | 205.63 *** |
© 2018 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).
Share and Cite
Duran, I.J.; Rodrigo, P. Why Do Firms in Emerging Markets Report? A Stakeholder Theory Approach to Study the Determinants of Non-Financial Disclosure in Latin America. Sustainability 2018, 10, 3111. https://doi.org/10.3390/su10093111
Duran IJ, Rodrigo P. Why Do Firms in Emerging Markets Report? A Stakeholder Theory Approach to Study the Determinants of Non-Financial Disclosure in Latin America. Sustainability. 2018; 10(9):3111. https://doi.org/10.3390/su10093111
Chicago/Turabian StyleDuran, Ignacio J., and Pablo Rodrigo. 2018. "Why Do Firms in Emerging Markets Report? A Stakeholder Theory Approach to Study the Determinants of Non-Financial Disclosure in Latin America" Sustainability 10, no. 9: 3111. https://doi.org/10.3390/su10093111