The relevance of non‐financial disclosure in influencing the cost of capital: Empirical evidence from the agri‐food sector

Abstract

The growing sensitivity of stakeholders towards health, food safety and environmental protection has pushed agri-food companies to embrace a new way of doing business, making huge investments to reduce their impact on ecosystem. However, these efforts would be in vain if not properly communicated, especially to financial institutions and investors, as they are the fundamental and supportive stakeholders.Through non-financial disclosure, indeed, this greater transparency would translate into benefits, such as creditworthiness, lower risks and costs of capital. From these considerations, this study aims at verifying to what extent the implementation of sustainability strategies can affect the overall cost of capital, observed in its dual form: debt and equity. In particular, through panel data analyses, it tested how nonfinancial disclosure-measured by Bloomberg's disclosure scores-could influence the cost of capital of a sample of 73 international agricultural firms observed from 2015 to 2019. The results showed a significant and negative relationship, suggesting that a higher level of disclosure could be effective in lowering firms' financial burden. This study contributes to the literature on non-financial disclosure and cost of capital as it studies this phenomenon in a sector in which previous research is limited.

La prise en compte des risques ESG dans les entreprises agroalimentaires québécoises

“…En second lieu, les entreprises agroalimentaires ont un impact majeur sur la plupart des enjeux de DD et les risques dans ce domaine méritent donc davantage d'investigation (Bellantuono et al, 2018;Patterson et al, 2020;Ross et al, 2015;Tarulli et al, 2022). Dans de nombreux pays en développement, le secteur agroalimentaire représente l'une des principales sources d'emplois et, à l'échelle internationale, une forte proportion des problèmes concernant les droits des travailleurs -travail forcé, travail des enfants, esclavage économique -concerne les activités agricoles et agroalimentaires (Centre international de solidarité ouvrière, 2020).…”

“…Les investissements socialement responsables, qui reposent pour une large part sur l'exposition des entreprises aux risques ESG, ont connu un développement très rapide au cours de la dernière décennie, et les marchés financiers en général sont de plus en plus sensibilisés à ces questions (Boiral et al, 2020b;Dorfleitner et al, 2015;Semenova et Hassel, 2015). Dans ce contexte, la bonne gestion des risques ESG est devenue un élément essentiel de la performance financière des entreprises (Sandberg et al, 2023;Tarulli et al, 2022;WBCSD, 2017). Les coûts et les impacts réputationnels des incidents ou des scandales qui résultent de la mauvaise gestion de certains risques ESG sont également de mieux en mieux documentés.…”

Firms' sustainability engagement and sustainability‐related controversies

“…A second case of a disconnect arises because firms can actively manage public perceptions of their sustainability engagement (Allen & Caillouet, 1994; Tetrault Sirsly & Lvina, 2019; Zavyalova et al, 2012), typically by actively reporting on sustainability efforts (e.g., Perez‐Cornejo et al, 2020; Sethi et al, 2016). Such an active reporting on sustainability is a major factor in dealing with stakeholders and shareholders alike (Tarulli et al, 2023; Yu et al, 2018). However, it is often not clear whether the reports and activities match: Greenwashing is a major issue, where the actual ESG engagement does not live up to the impressions firms generate (Chun et al, 2019; Coen et al, 2022).…”

“…Sustainability issues matter for a range of stakeholder groups, such as activists (Garces‐Ayerbe et al, 2012) and customers (Rodgers et al, 2019; Sen & Bhattacharya, 2001), but even potential employees deciding whether to work for a particular firm (Turban & Greening, 1997). While reporting on sustainability was optional for a long time, it became obligatory: Formal and informal communications on sustainability are central elements in firms' communication with stakeholders and have substantial economic impact on the firm (Gjergji et al, 2021; Tarulli et al, 2023).…”

“…While reporting on sustainability was optional for a long time, it became obligatory: Formal and informal communications on sustainability are central elements in firms' communication with stakeholders and have substantial economic impact on the firm (Gjergji et al, 2021;Tarulli et al, 2023).…”