Abstract:
Corporate managers are currently encountering increasing pressure from stakeholders to enhance the disclosure of nonfinancial information regarding their companies. This arises due to the insufficiency of traditional financial data provided by companies, which lacks additional information crucial for making investment decisions. A growing body of literature has emerged, aiming to investigate the relationship between nonfinancial disclosure and stock prices through the utilization of various methodologies and models. This manuscript critically assesses existing literature that seeks to elucidate the significance of nonfinancial disclosure in eliciting reactions in stock prices. Specifically, the study focuses on three key nonfinancial disclosure variables: environmental, social, and governance factors. Based on the analysis, the paper concluded that the findings from previous studies are inconclusive and varied, thereby indicating the necessity for further research employing different analytical techniques.
Description:
The corporate reporting landscape has experienced considerable transformations during the past three decades. These transformations have occurred because of mounting pressure from investors and other stakeholders for companies to provide more comprehensive information that is pertinent to decision-making (Cortesei and Vena, 2019). As an illustration, numerous companies are issuing separate reports on corporate social responsibility and the environment in order to update stakeholders on their efforts to support the local community and safeguard the environment (Ramiah et al., 2013). There exists a contentious debate regarding the impact of accounting disclosures on stock prices. This is because certain scholars argue that the market rewards companies with outstanding traditional accounting performance metrics, such as earnings per share and book value per share, rather than other additional voluntary disclosures (Thilini et al., 2020). Other facets of disclosure, such as information concerning a company's carbon emissions, have been found to influence investors' decision-making (Griffin et al., 2017).
