Driving through the fog: exploring factors affecting disclosure readability in the European agrifood and beverage industries

What is it about?

After the introduction of the Directive 2014/95/EU understandability of non-financial information (NFI) gain growing attention by academics, regulators and policy makers. According to some authors (i.e. Jones and Shoemaker, 1994) readability indexes represent an interesting tool to measure the understandability of a text. Hence, we aim to analyse on one hand the readability of NFI in agrifood and beverage sector (A&B) adopting the Gunning Fog index; on the other hand, we investigate what are the corporate governance mechanism that strengthen the readability of NFI. We focus on A&B sector because it is particularly under the lens of the Directive owing to its strong environmental impact and strict connection to the availability of natural, physical, and human resources. Adopting a sample of 744 firm-year observations from 2017, the first year after the Directive entered in force, to 2020, the last year available, and developing an OLS, we find that the independence of the board, gender diversity, CEO duality and the presence of a CSR committee are useful levers to reach greater accountability. We believe that this study can be appreciated by scholars because, to the best of our knowledge, this is the first research that investigates the readability of NFI after the introduction of the Directive, so we analyse this phenomenon under the lens of mandatory disclosure and no longer from a voluntary disclosure perspective. In addition, this study is beneficial for policy makers and regulators because suggest them that some corporate governance characteristics are valuable and can help them to drive well through the “Fog”.

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