Disclosure Dynamics and Non-Financial Reporting Analysis. The Case of Romanian Listed Companies

Tracking Waste Management Information Disclosure Behavior Connected to Financial Performance through Moderating Variables

The current challenges of a circular economy exert a high pressure on manufacturing companies that generate waste to track and implement policies to reduce them and eliminate the toxicity of residues. Hence, the purpose of this study is to analyze the waste management information disclosure linked to the financial performance of companies and test the moderating effect of internal and external variables. The average waste management information disclosure index shows a poor disclosure score for the analyzed period, however, the waste disclosure index after reaching a minimum threshold in 2019 recorded an encouraging increase at the end of 2021. Applying the fixed effects model, ordinary least squares, and two-stage least squares method, the results revealed a positive and statistically significant relationship between management information disclosure and the return on assets, while for the current ratio the connection has been invalidated. A statistically significant influence of the environmental-sensitive industry status, board size, and productivity on the moderating variables was found for the return on assets, while for current ratio, there was none. As for the alternative metrics of financial performance, the results showed that a higher degree of management information disclosure will increase the return on equity and earnings per share, while in the case of liquidity, the results are not conclusive.

Barriers to Using ESG Data for Investment Decisions

Institutional investors who commit to integrating environmental, social and governance (ESG) aspects into investment decisions require ESG data of sufficient quality. However, concerns have risen over a lack of quality in ESG data, as outlined by the Global Reporting Initiative. The lack of quality in ESG data deters institutional investors from using the data for investment decisions. This study outlines the ESG data reporting process and explores where in the process quality concerns emerge. Semi-structured interviews are applied with professionals involved in ESG data analysis and reporting of listed companies, a rating agency and institutional investors. The results show that current barriers to using ESG data include a lack of materiality, accuracy and reliability. Interviewees agree that access to data collected by governmental institutions is lacking, and that companies’ purchase of carbon credits raise questions about the reliability of ESG data. Companies hold contrasting views to the institutional investors on the useability of the data they disclose. The results enhance our understanding of the common and contrasting concerns about the lack of quality in ESG data. The results can be used as guide for companies, investors and regulators for actions to mitigate barriers related to the lack of quality in ESG reporting.

Assessment of the Mandatory Non-Financial Reporting of Romanian Companies in the Circular Economy Context

Between the circular economy and corporate social responsibility, there is an ever-closer connection. Non-financial reporting of social responsibility actions is based on the circular economy concept, so reporting contributes to increasing the level of disclosure of circular strategies. In this context, large companies are required to report non-financial information to understand their activities better. The paper’s objective is to assess the mandatory non-financial reporting of Romanian companies active in the non-financial sector for 2017–2019. The empirical analysis consisted of creating and awarding an evaluation score to the reports of the companies. An econometric model was tested using a feasible generalized least squares (FGLS) regression to identify the link of the obtained Score with a series of variables representing the characteristics of the companies: Information on a website (I), Foreign ownership (F), Private ownership (P), Listed company (L), Return on assets (ROA), and Return on equity (ROE). Research results highlight a positive correlation between Score and all variables statistically significant in the model. Our study empirically validated the link between non-financial reporting and financial performance. The practical implications for managers can be to focus on improving the quality of non-financial reporting by better presenting the sustainability actions in a circular economy context.