Scoring Nonfinancial Information Reporting in Italian Listed Companies: A Comparison of before and after the Legislative Decree 254/2016

Abstract

Directive 2014/95/EU requires EU Member States to mandate nonfinancial disclosures for large public interest entities. The adoption of the Legislative Decree 254/2016, transposing into Italian law the EU Directive, has opened up new perspectives for research on the effects produced by regulatory requirements on nonfinancial information (NFI) in the Italian context. This paper aims to examine how the new regulation is influencing the quantity of NFI disclosed by Italian companies concerning sustainability matters required by the Directive. Content analysis is used to verify the sustainability indicators disclosed by Italian companies before and after the implementation of the Decree. A composite indicator of disclosure performance is then constructed using Principal Component Analysis (PCA). The results highlight a generalized reduction of indicators disclosed by companies belonging to the sample. Over the three years analysed, most companies have improved their disclosure ranking. Nevertheless, a comparison among companies having the same ranking showed a decrease in the disclosure index for the majority of them. Despite the growing attention paid by academics to Directive 95/2014/EU and its implementation in Italy, this is one of the few studies that has evaluated the effects of the Decree over three years, considering what happened after the first year of its implementation.

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

“…These companies have been the sample of numerous research studies in this field of sustainability. Various studies [37][38][39][40][41] have been conducted on companies that represent examples of good practice in terms of their flexibility to adapt to responsible corporate reporting requirements. Several reports are published on the websites of representative bodies [2,9].…”

“…In terms of compliance, various studies [10,[41][42][43][44][45][46][47] were conducted to identify the reaction of companies to the mandatory transposition of what was voluntary. How prepared companies are for reporting as required by the directive is the question that many researchers have asked themselves [42][43][44].…”

“…Italian companies, on the other hand, will benefit from this regulation, expecting further efforts from them to improve the quality of non-financial reports [43,44]. Some researchers [10,41,[45][46][47] conducted comparative analyzes of non-financial reporting practices before and after the European directive. The effects of the new regulation for the 70 Italian companies analyzed by Venturelli et al [45] consisted only in increasing the number of non-financial reports published in 2018 compared to 2016, but with a lower overall degree of comparability of data.…”

“…The conclusions of the study also highlighted the discrepancies in non-financial reporting between companies in different sectors of activity, without testing the existence of a correlation between the type of industry and the number of sustainability performance indicators reported. To conduct a comprehensive analysis of the sustainability performance of companies and to place them in a hierarchy, Tarquinio et al [41] extend the study to 57 Italian listed companies for the period 2016-2018, before and after the European directive. The downward trend in the non-financial disclosure index for the majority of them is confirmed once again, but most companies have improved their disclosure metrics during the analyzed period.…”

“…Exploring the sustainability performances of companies using environmental, social, and governance scores was done by several researchers [2,3,9,10,41,64,65]. Used in addition to the financial score, the use of these scores increases accuracy in assessing performance and risk [64].…”