The Impact of Corporate Governance on Corruption Disclosure in European Listed Firms through the Implementation of Directive 2014/95/EU

Abstract

The publication of Directive 2014/95/EU represents an important milestone related to the disclosure of non-financial information. This fact together with the role of the corporate governance guide firms towards achieving of an ethical, transparent, and responsible behavior. To contribute towards the understanding of this issue, this study investigates the relationship between corporate governance mechanisms and corporate social responsibility disclosure, namely, in corruption aspects relating to Directive 2014/95/EU. In so doing, a multiple regression analysis was carried out on a panel data sample of 198 European listed firms that are part of the EuroStoxx 200 index, in a studied period from 2014 to 2017. The findings reveal that outside directors and CEO duality impact positively and significantly on corruption disclosure. Therefore, this paper contributes to the existing research on corporate social responsibility disclosure, specifically, to the corruption disclosure literature by studying the corporate governance mechanisms that enhance these practices.

Corruption, corporate governance, and sustainable development goals in Africa

“…African countries that experience a higher corruption prevalence will be able to achieve the UN SDGs if they have a strong corporate governance system. The result is consistent with previous pieces of empirical evidence that corporate governance reduces corruption's effect on the economy (Wu, 2005), mitigates the tendency to manipulate financial reports (Martı ´nez-Ferrero and Garcı ´a-Meca, 2020), is more shareholder-value oriented and is less likely to engage in unethical behavior (Carrillo et al, 2019). The results also point to the possibility that corporate governance is valuable because it resolves information asymmetry problems and deters corrupt practices (Wu, 2005;Boateng et al, 2020), thereby leading to favorable development outcomes.…”

“…Also, corporate governance indicators such as investor protection reduce the effect of CSR on the manipulation of financial reports (earnings management) (Martı ´nez-Ferrero and Garcı ´a-Meca, 2020). In addition, companies that operate in countries with strong investor protections are found to be shareholder-value oriented and less likely to engage in unethical behavior (Carrillo et al, 2019). Furthermore, strong accounting and auditing standards help solve information asymmetry problems and deter corrupt practices (Wu, 2005;Boateng et al, 2020).…”

“…Studying the effect of corporate governance on SD has recently attracted the attention of academics, regulators and policymakers. The empirical studies can be broadly classified into two categories: those that sought to determine firm-level governance variables on SDGs through sustainability disclosure (Consuelo et al , 2018; Consuelo and Martínez, 2019; Martínez-Ferrero and García-Meca, 2020) and those that related corporate governance with corruption aspects of SDGs (Carrillo et al , 2019; Jaggi and Macchioni, 2020). In the first instance, Martínez-Ferrero and García-Meca (2020) assessed the contribution of internal corporate governance to SDGs using data from 11 industries in 21 European countries.…”

“…Emerging literature focuses on the effect of governance variables on the corruption disclosure aspect of SD (Carrillo et al , 2019; Jaggi and Macchioni, 2020; Masud et al , 2019). In this regard, Carrillo et al (2019) found that CEO duality and outside directors positively impact corruption disclosure in a sample of European firms.…”

Anti-corruption disclosure quality and earnings management in the United Kingdom: the role of audit quality

“…Arguably, ACD_Q has been largely influenced by a business contemplating its social responsibilities that would include an accountability pledge in its reporting, increased transparency, fight against corruption and decreasing EM (Bozzolan et al, 2015;Hess, 2009;Kuo et al, 2021;Schwartz and Caroll, 2003). As part of ESG disclosure, recent literature highlighted the positive association of ACD_Q with firms' performance and reputation (Álvarez Etxeberria and Aldaz Odriozola, 2018;Alonso Carrillo et al, 2019;Branco et al, 2019). Despite rising public demand for enhanced openness in anti-corruption initiatives (Halter et al, 2009), ACD_Q has received far less scholarly efforts than other CSR dimensions (Wilkinson, 2006).…”