TY - JOUR
T1 - Financial disclosure quality and sustainability disclosure quality.
T2 - A case in China
AU - Abeysekera, Indra
AU - Li, Feng
AU - Lu, Yingjun
N1 - Publisher Copyright:
© 2021 Abeysekera et al. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
Copyright:
Copyright 2021 Elsevier B.V., All rights reserved.
PY - 2021/5/28
Y1 - 2021/5/28
N2 - This paper empirically examines whether there is an association between financial reporting disclosure quality and sustainability disclosure quality of the top 100 socially reputed Chinese listed firms. The paper computed financial disclosure quality by empirically combining earning qualities of accrual, persistence, predictability, and smoothness. Using content analysis and survey questionnaire research methods, it calculated sustainability quality by combining disclosure quantity (through quantitative weightings), disclosure type (through qualitative weightings), and disclosure item importance (through qualitative weightings) of economic, social, and environmental disclosures made in annual and sustainability reports, ascertained using the Global Reporting Initiative sustainability framework. The study finds that sustainability disclosure in the current period is sufficiently associated with financial disclosure quality of the current period and future period. Consistent with stakeholder theory, firms with a social reputation are perceived as trustworthy by stakeholders and shareholders. The findings lead to a cultural stakeholder theory where underlying values of societal culture create a condition supporting mutual stakeholder relationships between firm and various stakeholders. Demonstrating trustworthiness through disclosures can help boost consumer confidence and foreign trade relations for Chinese firms. The Chinese government can design innovative schemes to reward and promote trustworthiness in firms, such as regulating base-point reductions in interest rates on borrowing or raising funds.
AB - This paper empirically examines whether there is an association between financial reporting disclosure quality and sustainability disclosure quality of the top 100 socially reputed Chinese listed firms. The paper computed financial disclosure quality by empirically combining earning qualities of accrual, persistence, predictability, and smoothness. Using content analysis and survey questionnaire research methods, it calculated sustainability quality by combining disclosure quantity (through quantitative weightings), disclosure type (through qualitative weightings), and disclosure item importance (through qualitative weightings) of economic, social, and environmental disclosures made in annual and sustainability reports, ascertained using the Global Reporting Initiative sustainability framework. The study finds that sustainability disclosure in the current period is sufficiently associated with financial disclosure quality of the current period and future period. Consistent with stakeholder theory, firms with a social reputation are perceived as trustworthy by stakeholders and shareholders. The findings lead to a cultural stakeholder theory where underlying values of societal culture create a condition supporting mutual stakeholder relationships between firm and various stakeholders. Demonstrating trustworthiness through disclosures can help boost consumer confidence and foreign trade relations for Chinese firms. The Chinese government can design innovative schemes to reward and promote trustworthiness in firms, such as regulating base-point reductions in interest rates on borrowing or raising funds.
KW - China
KW - Disclosure quality
KW - financial disclosure quality
KW - sustainability
KW - sustainability disclosure quality
UR - http://www.scopus.com/inward/record.url?scp=85106667439&partnerID=8YFLogxK
U2 - 10.1371/journal.pone.0250884
DO - 10.1371/journal.pone.0250884
M3 - Article
C2 - 34048431
AN - SCOPUS:85106667439
VL - 16
SP - 1
EP - 20
JO - PLoS One
JF - PLoS One
SN - 1932-6203
IS - 5
M1 - e0250884
ER -