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Corporate Disclosures Regulations: Social Solution or a Problem?
Dalarna University, School of Information and Engineering, Microdata Analysis.ORCID iD: 0000-0003-2952-7327
2021 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

Regulations are argued to have the answer to solving various social and economic problems that society faces today (e.g., climate change, tax evasion, etc.). However, regulations may instead become the problem (e.g., overregulation). The central research question of this doctoral thesis is “are corporate disclosures regulations a social solution or a problem?” 

To answer the central research question, Papers I and II examine the economic effects of an EU-wide audit reform, the Annual Accounts Directive: 2013/34/EU, on firms and the society. Papers III, IV, and V examine firm behavior to assess the need for public regulation of nonfinancial reporting in the light of an EU-wide reform, the Nonfinancial Reporting Directive: 2014/95/EU, commonly known as the NFRD.

The thesis posits that the current implementations of these reforms in some settings are imperfect and thus costly for the firms and society. It recommends deregulation of the monitoring of financial disclosure, i.e., to allow more small firms the option of deciding if an audit is beneficial for them or not. On the other hand, recommends a different approach for regulating nonfinancial reporting, e.g., sustainability reporting. For instance, regulations that can influence firms’ governance structure, e.g., board diversity. A firm with a diverse board is more likely to adopt a sustainability agenda which is better aligned with the expectations of the EU regulators. 

Stakeholders use firms’ disclosures to evaluate its performance and behavior for various decision making. For example, shareholders, in their investing or divesting decisions; analysts, in making various forecasts and recommendations; or governments, in assessing the need for reforms. Historically, stakeholders commonly used financial information for these types of decision making. Hence, there are well established generic measures to evaluate firms’ financial information (e.g., earnings quality measures and financial-statement ratios). Nowadays, stakeholders are increasingly using firms’ sustainability related information in their decision-making process as well. However, replicable and scalable generic measures to evaluate such information are missing. This thesis develops objective approaches and a generic measure, to evaluate firms’ sustainability related disclosures. The developed approaches for analyzing unstructured text data may be applied to other fields that can benefit from the use of natural language processing tools.

Place, publisher, year, edition, pages
Borlänge: Dalarna University, 2021.
Series
Dalarna Doctoral Dissertations ; 17
Keywords [en]
audit choice, audit regulations, corporate governance, corporate sustainability, EU-wide accounting reforms, firm growth, greenhouse gas emissions, machine learning, microdata analysis, natural learning processing, new institutional economics, nonfinancial reporting, survey
National Category
Business Administration Computer and Information Sciences
Identifiers
URN: urn:nbn:se:du-38100ISBN: 978-91-88679-16-1 (print)OAI: oai:DiVA.org:du-38100DiVA, id: diva2:1593814
Public defence
2021-11-12, Room 311, Borlänge, 13:00 (English)
Opponent
Supervisors
Available from: 2021-10-18 Created: 2021-09-14 Last updated: 2023-08-17Bibliographically approved
List of papers
1. Do audited firms have lower cost of debt?
Open this publication in new window or tab >>Do audited firms have lower cost of debt?
2018 (English)Report (Other academic)
Abstract [en]

The purpose of this study is to investigate if audited financial statements add value for firms in the private debt market. Using an instrumental variable method, we find that firms with audited financial statements, on average, save 0.47 percentage points on the cost of debt compared to firms with unaudited financial statements. We also find that using the big, well-known auditing firms does not yield any additional cost of debt benefits. Lastly, we investigate if there are industries where alternative sources of information make auditing less valuable in reducing the cost of debt. Here we find that auditing is less important in lowering cost in one industry, agriculture, where one lender has a 74% market share and a 100-year history of lending to firms within that industry. As such, it seems that lenders having high exposure to a certain industry might act as an alternative to auditing in reducing the information asymmetry between the firm and the lender.

Publisher
p. 36
Series
HUI Working Paper ; 132
Keywords
External Audit, Regulation, Agency Theory, Audit reform, Audit complexity, Cost of capital, Endogenous switching model, Private limited firms
National Category
Business Administration
Research subject
Research Profiles 2009-2020, Complex Systems – Microdata Analysis
Identifiers
urn:nbn:se:du-28407 (URN)
Available from: 2018-08-28 Created: 2018-08-28 Last updated: 2021-11-12Bibliographically approved
2. Free to Choose: Do Voluntary Audit Reforms Increase Employment Growth?
Open this publication in new window or tab >>Free to Choose: Do Voluntary Audit Reforms Increase Employment Growth?
2021 (English)In: International Journal of the Economics of Business, ISSN 1357-1516, E-ISSN 1466-1829, Vol. 28, no 1, p. 163-178Article in journal (Refereed) Published
National Category
Business Administration
Identifiers
urn:nbn:se:du-35183 (URN)10.1080/13571516.2020.1802963 (DOI)000570781100001 ()2-s2.0-85091035773 (Scopus ID)
Available from: 2020-10-14 Created: 2020-10-14 Last updated: 2023-04-14Bibliographically approved
3. Who are the intended users of CSR reports?: Insights from a data-driven approach
Open this publication in new window or tab >>Who are the intended users of CSR reports?: Insights from a data-driven approach
2021 (English)In: Sustainability, E-ISSN 2071-1050, Vol. 13, no 3, p. 1070-1090Article in journal (Refereed) Published
Abstract [en]

There is extant research on theorization, conceptualization, determinants, and consequences of corporate social responsibility (CSR). However, what firms include in their CSR or sustainability reports are much less covered and are predominantly covered in case studies of individual firms. In this paper, we instead take a holistic view and simultaneously explore what firms around the globe currently disclose in these reports, more specifically we investigate if firms are shareholder or stakeholder focused. In this investigation, we check the alignment of the reports to the materiality framework of Sustainability Accounting Standards Board (SASB) which was developed having shareholders as the intended user. To estimate what firms disclose in CSR reports we used the unsupervised Bayesian machine learning approach latent Dirichlet allocation (LDA) developed by Blei et al. We conclude that firms target shareholders as the intended users of these reports, even in environments where stakeholder approach of management is argued to be more dominant. Methodologically, we contribute by demonstrating that topic modeling can enhance the objectivity in reviewing CSR-reports.

Keywords
CSR; sustainability; text mining; topic modeling; big data
National Category
Business Administration Information Systems
Identifiers
urn:nbn:se:du-35829 (URN)10.3390/su13031070 (DOI)000615633500001 ()2-s2.0-85099967041 (Scopus ID)
Available from: 2021-01-21 Created: 2021-01-21 Last updated: 2023-04-14Bibliographically approved
4. Measuring accountable information in CSR reports: A new operationalization and analysis applied to GHG disclosures
Open this publication in new window or tab >>Measuring accountable information in CSR reports: A new operationalization and analysis applied to GHG disclosures
2020 (English)Report (Other academic)
Abstract [en]

The paper contributes to the debate if voluntary nonfinancial disclosures, such as greenhouse gas disclosures in corporate social responsibility reporting, exhibit accountability or are merely greenwashing. If firms exhibit accountability, does their actions translate into observable impacts, e.g., as country-level real changes in GHG emissions? How do contextual factors affect accountable disclosures in CSR reporting? To answer these questions, we develop a novel measure to classify accountable information of GHG disclosures in CSR reporting. We operationalize the measure using natural language processing tools, such as collocation analysis, regular expressions, and text mining. Statistical models were used to carry out aggregate analysis to detect real effects in GHG emissions reductions and firm-level analysis to investigate how institutional factors affect accountable GHG disclosures. We find that firms headquartered or reporting in a civil-law legal-environment disclose significantly higher accountable information compared to those in a common-law legal-environment. However, there is a negative trend in accountability worldwide, and firm-level accountability in GHG disclosures is not detectable in a country-level reduction of GHG emissions. The results are robust for various alternative model specifications, and operationalization of the developed measure achieved high concordance when investigated on random samples manually. Compared to most past studies, we work with a significantly larger sample of 4459 reports across 82 countries, thereby dealing with greater complexity and leading to better generalizability. In addition, developing an approach that is many folds scalable and makes replicability straightforward. This is also one of the few studies to move beyond the usual “bag-of-words” approach in classifying voluminous corporate disclosure using NLP techniques.

Place, publisher, year, edition, pages
Borlänge: Dalarna University, 2020. p. 40
Series
Working papers in transport, tourism, information technology and microdata analysis, ISSN 1650-5581 ; 2020:02
Keywords
greenhouse gas, accountability, text mining, CSR, sustainability
National Category
Business Administration
Research subject
Research Profiles 2009-2020, Complex Systems – Microdata Analysis
Identifiers
urn:nbn:se:du-34935 (URN)
Available from: 2020-09-02 Created: 2020-09-02 Last updated: 2021-11-12Bibliographically approved
5. Friedman doctrine prevails! Or does it?: Evidence from the views of practitioners on corporate sustainability in their firms
Open this publication in new window or tab >>Friedman doctrine prevails! Or does it?: Evidence from the views of practitioners on corporate sustainability in their firms
2021 (English)Report (Other academic)
Abstract [en]

The purpose of this paper is to provide insights on the views of firms regarding corporate sustainability (CS) and how the structure of the board affects this. We surveyed the CEOs, CFOs, and Environment Officers of about 850 Swedish firms (response rate 21%) affected by mandatory sustainability reporting after the implementation of the EU Directive 2014/95/EU. The six-transcending ambition levels (namely: pre-CS, compliance-driven, profit-driven, caring, synergistic, and holistic) of corporate sustainability proposed by van Marrewijk & Werre (2003) were used to classify the views of key officers on the sustainability agenda of their respective firms. We find that the drive by firms for higher CS ambition levels is positively influenced by a diverse board (i.e., representation of female board members), and the effect is more pronounced if the board is constituted with a female top executive. Moreover, younger top executives are more likely to have a higher CS ambition level. On the other hand, external CEOs, external board members, and forceful disclosure of sustainability activity (e.g., EU Directive 2014/95/EU) do not significantly influence CS ambition levels, whereas firm size and industry affiliation do. Our findings are useful for top managers and regulators interested in corporate governance issues and influencing the sustainability efforts of their firms. Methodologically, the use of a survey method is an extension to an otherwise high reliance on archival research in the field of CS. Furthermore, the dataset is unique, and the results are robust to various sensitivity analyses.

Place, publisher, year, edition, pages
Borlänge: Dalarna University, 2021
Series
Working papers in transport, tourism, information technology and microdata analysis, ISSN 1650-5581 ; 2021:04
Keywords
corporate sustainability; board diversity; sustainability regulations; gender; survey
National Category
Business Administration
Identifiers
urn:nbn:se:du-38117 (URN)
Available from: 2021-09-15 Created: 2021-09-15 Last updated: 2023-04-14

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Huq, Asif M

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