The number of studies on non-financial reporting by public sector entities is steadily increasing. Public sector entities have begun to report non-financial data to meet the needs of various stakeholders. Previous research has shown that public entities have begun to disclose non-financial information through various non-financial reports, such as sustainability reports, popular reports, integrated reports, and reports on websites or social media. This paper examines the disclosure of non-financial information in the form of non-financial reports by Croatian public sector entities and the reasons for publishing or not publishing such reports. The research is based on a questionnaire survey of Croatian public sector executives conducted in 2022. The results show that Croatian public sector entities have started to publish non-financial reports and that publication in the future is viewed positively. However, most of those who indicated that their institution does not prepare non-financial reports and those who do not know if their institution prepares the report are unfamiliar with non-financial reporting and non-financial reporting standards. This paper adds to the limited literature on non-financial reporting in the public sector. It reveals that the most important reason for not publishing non-financial reports by public sector entities is the absence of a legal requirement for non-financial reporting.
Background: Non-financial reporting in the public sector is a relatively new topic. In the European Union, through Directive 2014/95/EU, non-financial reporting of public interest entities with over five hundred employees at the reporting date was introduced. Thus, member states are obliged to incorporate non-financial reporting into their national legislation. Purpose: The paper examines the assumption that more profitable companies will publish more information in non-financial reports to show their performance. Another assumption is that more indebted companies are producing more non-financial disclosures. Therefore, the purpose of this study was to determine whether there was a relationship between the information that is made public in public sector enterprises' (SOEs') non-financial reports and their financial performance. Methods/Approach: The paper analyses data from publicly available non-financial reports of SOEs for the period 2017-2019. The sample consists of 27 companies, including 10 Croatian SOEs, 10 Slovenian SOEs, and 7 Hungarian SOEs. Findings: Based on the conducted research we have drawn following findings; State ownership has a negative impact on the information provided in non-financial reports, while the quantity of information provided and the number of employees are positively correlated. Profitability has a negative impact on non-financial reporting, while a higher net profit will increase non-financial disclosures. Leverage has a positive impact on the IRD index in the sample of Croatia and Slovenia that was observed. Conclusion: Non-financial reporting has been implemented in accordance with Directive 2014/95/EU. In the examined sample of SOEs a correlation was found between non-financial reporting and the profitability and indebtedness of SOEs. Originality: Research in the paper has been made on previously unresearched examples – SOEs non-financial reporting in Croatia, Slovenia and Hungary.
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