Sustainability Reporting Quality of Peruvian Listed Companies and the Impact of Regulatory Requirements of Sustainability Disclosures

Abstract

Regulations establishing mandatory sustainability reporting practices are proliferating around the world. The empirical evidence comparing sustainability reporting quality (SRQ) in the context of mandatory and voluntary institutional frameworks does not show consensus. Similarly, this occurs with studies addressing the effects of regulatory shocks on SRQ. Moreover, empirical evidence addressing SRQ in Latin American countries is scarce. To fill this gap, this study aims to explore the consequences of introducing new regulatory requirements for sustainability disclosure on SRQ of Peruvian companies. To reach that goal, 81 sustainability disclosure documents published between 2014 and 2016 by 27 companies included in the S&P/BVL Peru General Index of Lima’s Stock Exchange were analyzed using qualitative content analysis methods and adopting a multidimensional approach for SRQ evaluation. The findings show a constant improvement of SRQ regardless of the introduction of the new regulatory requirements. Furthermore, after the entry into force of new sustainability reporting obligations, the number of companies providing third-party independent assurance of the information contained in their sustainability disclosure documents decreases, suggesting that for the Peruvian case, regulatory requirements tend to discourage companies to invest in the credibility of their sustainability disclosure documents, and promote a symbolic application of sustainability disclosure standards.

Board governance mechanisms and sustainability reporting quality: A theoretical framework

“…Sustainability studies in the developing economy dwell more on the probability and extent of disclosures, determinants of disclosure, signaling firm reputation, and for international comparisons of disclosures (Hahn & Kühnen, 2013;Larrán-Jorge & Martínez, 2013;Odriozola & Baraibar-Diez, 2017). Justifying that there is a dearth of SRQ studies (Loza Adaui, 2020;Yusoff et al, 2015). In this case, Malaysia is not an exception considering the less empirical attention on SRQ and the calls for further investigations (e.g., Aziz & Rosmiza, 2017;Hussain et al, 2018;Zahid et al, 2016Zahid et al, , 2020.…”

Financial disclosure quality and sustainability disclosure quality. A case in China

“…State intervention on environmental and sustainability disclosure has shown mixed results. For instance, EU directives have led to large companies making more disclosures [ 23 ]; a study with Bangladeshi Banks showed that regulatory pressures lead to authentic sustainability disclosure [ 24 ]; and a study conducted with firms in Peru showed that regulatory intervention on sustainability disclosure has no effect [ 25 ].…”

“…The findings bring forth the vitality of Confucian virtue, Guanxi, understood through its direct connection with two other virtues: xinyong–trustworthiness, and renqing–mutual obligations. Research shows that other countries have required regulatory intervention to promote sustainability disclosure, under the presumption that societal cultural virtues are unable to promote such ideals of disclosure [ 22 – 25 ]. The phenomenon lends support to the conclusion of some researchers that Guanxi is unique to the Chinese culture [ 56 , 57 ].…”

“…A study conducted in Peru ascertained sustainability disclosure quality using 23 items constructed by the researchers. These items comprise 9 credibility-related items, 11 content-related items, and 3 communication-related items [ 25 ]. This study differs from previous studies in measuring sustainability disclosure quality in five ways.…”

“…Research conducted in Peru found that regulatory pressures had no impact on sustainability disclosure quality, an index constructed by researchers. The Peruvian study pointed out that one reason for such difference may arise because some countries follow the regulatory intervention of firms to disclose and explain, whereas other countries (for example, India) follow firms to disclose or otherwise be penalised [ 25 ]. These studies show that the impact of regulatory intervention and sustainability disclosure quality are unresolved research agendas requiring clarity through further research.…”