Application of EU non-financial disclosure rules to Hungarian listed companies between 2019 and 2022

Authors

DOI:

https://doi.org/10.14267/VEZTUD.2023.12.03

Keywords:

non-financial report, non-financial statement, listed companies, Non-Financial Reporting Directive

Abstract

The study examines the non-financial reports and statements of listed companies in the Hungarian context. The disclosure of non-financial sustainability information has been regulated by the European Union since 2014 and this regulation has recently changed significantly in line with Environment, Social, Governance (ESG) principles. The aim of the study was to find out to what extent the Hungarian companies listed on the Budapest Stock Exchange comply with the requirements of the Accounting Act on the disclosure of non-financial information under the Non-Financial Reporting Directive (NFRD), which gives an idea of their preparedness for the regulatory change and stakeholder expectations. The research is not looking at ESG conditions but rather at compliance with the Accounting Act. In this context, we assessed the companies’ published reports for 2019 – 2020 using content analysis methods. From this, dummy variables were constructed to form an index, which was then correlated with the financial indicators.

Downloads

Download data is not yet available.

Author Biographies

Szilárd Hegedűs, Budapest Business University

college associate professor

Barbara Kardos, Budapest Business University

associate professor

Zsuzsanna Győri, Budapest Business University

senior research fellow

References

Almeida, R. (2017). Corporate social responsibility and performance: Evidence from the water industry. New Trends and Issues Proceedings on Humanities and Social Sciences, 4(10), 265–272. https://doi.org/10.18844/prosoc.v4i10.3091

Anton, W. R. Q., Deltas, G., & Khanna, M. (2004). Incentives for environmental self-regulation and implications for environmental performance. Journal of Environmental Economics and Management, 48(1), 632–654. https://doi.org/10.1016/j.jeem.2003.06.003

Baboukardos, D., & Rimmel, G. (2016). Value relevance of accounting information under an integrated reporting approach: A research note. Journal of Accounting and Public Policy, 35(4), 437–452. https://doi.org/10.1016/j.jaccpubpol.2016.04.004

Baret, P., & Helfrich, V. (2019). The “trilemma” of non-financial reporting and its pitfalls. Journal of Management and Governance, 23(2), 485–511. https://doi.org/10.1007/s10997-018-9430-z

Barth, M. E., Cahan, S. F., Chen, L., & Venter, E. R. (2017). The economic consequences associated with integrated report quality: Capital market and real effects. Accounting, Organizations and Society, 62, 43–64. https://doi.org/10.1016/j.aos.2017.08.005

Beske, F., Haustein, E., & Lorson, P. C. (2020). Materiality analysis in sustainability and integrated reports. Sustainability Accounting, Management and Policy Journal, 11(1), 162–186. https://doi.org/10.1108/SAMPJ-12-2018-0343

Beyer, A., Cohen, D. A., Lys, T. Z., & Walther, B. R. (2010). The financial reporting environment: Review of the recent literature. Journal of Accounting and Economics, 50(2/3), 296–343. https://doi.org/10.1016/j.jacceco.2010.10.003

BlackSun. (2014). Realising the benefits: The impact of Integrated Reporting. https://integratedreporting.org/resource/realizing-the-benefits-the-impact-ofintegrated-reporting/

Botosan, C. A. (1997). Disclosure level and the cost of equity capital. The Accounting Review, 72(3), 323–349. http://www.jstor.org/stable/25151401

Boros, A., Lentner, C., & Nagy, V. (2022). New aspects of sustainability: analysis of the European practice of nonfinancial reports. Public Finance Quarterly, 67(2), 181-195. https://doi.org/10.35551/pfq_2022_2_2

Brown, J., & Dillard, J. (2021). Accounting for nonfinancial matters: Technologies of humility as a means for developing critical dialogic accounting and accountability. Meditari Accountancy Research, 29(2), 197–218. https://doi.org/10.1108/MEDAR-01-2020-0692

Cahan, S. F., De Villiers, C., Jeter, D. C., Naiker, V., & Van Staden, C. J. (2016). Are CSR disclosures value relevant? Cross-country evidence. European Accounting Review, 25(3), 579–611. https://doi.org/10.1080/09638180.2015.1064009

Camilleri, M. A. (2018). Theoretical insights on integrated reporting: The inclusion of non-financial capitals in corporate disclosures: The inclusion of nonfinancial capitals in corporate disclosures. Corporate Communications, 23(4), 567–581. https://doi.org/10.1108/CCIJ-01-2018-0016

Christensen, H. B., Hail, L., & Leuz, C. (2021). Mandatory CSR and sustainability reporting: Economic analysis and literature review. Review of Accounting Studies, 26(3), 1176–1248. https://doi.org/10.1007/s11142-021-09609-5

Cohen, R., JD, LLM, & Lingenfelter, G. (2017). Money isn’t everything: why public benefit corporations should be required to disclose non-financial information. Delaware Journal of Corporate Law, 42(1), 115–147.

Cornell, B., & Damodaran, A. (2020). Valuing ESG: Doing Good or Sounding Good? Journal of Impact and ESG Investing, 1(1), 76–93. https://doi.org/10.3905/jesg.2020.1.1.076

D’Andrea, A., Giuliani, M., & Marasca, S. (2021). Nonfinancial disclosure and intra-industry comparability: a macro, meso and micro analysis. Sustainability, 13(3), 1177. https://doi.org/10.3390/su13031177

De Villiers, C., & Marques, A. (2016). Corporate social responsibility: country-level predispositions and the consequences of choosing a level of disclosure. Accounting and Business Research, 46(2), 167–195. https://doi.org/10.1080/00014788.2015.1039476

Dees, S. (2019). The influence of long-term orientation and integrated reporting on financial performance. Radboud University Nijmegen School of Management. https://doi.org/10.1007/978-1-349-95810-8_982

Dumitru, M., & Guşe, R. G. (2017). The legitimacy of the international integrated reporting council. Journal of Accounting and Management Information Systems, 16(1), 30–58. https://doi.org/10.24818/jamis.2017.01002

Dutta, S., & Nezlobin, A. (2017). Information disclosure, firm growth, and the cost of capital. Journal of Financial Economics, 123(2), 415–431. https://doi.org/10.1016/j.jfineco.2016.04.001

Eccles, R. G., & Krzus, M. P. (2010). Integrated reporting for a sustainable strategy: One Report has the potential to significantly change how companies operate and investors think, shifting the focus from that of meeting short-term financial goals to developing a long-term business strategy that not only makes a commitment to corporate social responsibility, but also to a sustainable society. Financial Executive, 26(2), 28–33.

EFRAG – European Financial Reporting Advisory Group (2022). Sustainability Standard Interim Draft. https://www.efrag.org/Activities/2105191406363055/Sustainability-reporting-standards-interim-draft

Egginton, J.F., & McBrayer, G.A. (2019). Does it pay to be forthcoming? Evidence from CSR disclosure and equity market liquidity. Corporate Social Responsibility and Environmental Management 26, 396–407. https://doi.org/10.1002/csr.1691

Európai Parlament és Tanács (2022). Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/ EC and Directive 2013/34/EU, as regards corporate sustainability reporting. https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32022L2464

Európai Számvevőszék (2019). Gyorsvizsgálat Fenntarthatósági jelentések: az uniós intézmények és ügynökségek értékelése. https://www.eca.europa.eu/Lists/ECADocuments/RCR_Reporting_on_sustainability/RCR_Reporting_on_sustainability_HU.pdf

Európai Tanács (2019). Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions- The European Green Deal. https://eur-lex.europa.eu/resource.html?uri=cellar:b828d165-1c22-11ea-8c1f-01aa75ed71a1.0002.02/DOC_1&format=PDF

Európai Tanács (2022a). New rules on corporate sustainability reporting: provisional political agreement between the Council and the European Parliament. https://www.consilium.europa.eu/en/press/press-releases/2022/06/21/new-rules-on-sustainability-disclosure-provisional-agreement-between-council-and-european-parliament/

Európai Tanács (2022b). Council gives final green light to corporate sustainability reporting directive. https://www.consilium.europa.eu/en/press/pressreleases/2022/11/28/council-gives-final-green-lightto-corporate-sustainability-reporting-directive/

Freeman, R. E. (2004). A stakeholder theory of modern corporations. In Ethical Theory and Business (pp. 56- 65). Prentice Hall.

García-Sánchez, I.-M., Raimo, N., Amor-Esteban, V., & Vitolla, F. (2021). Board committees and nonfinancial information assurance services. Journal of Management and Governance, 27, 1-42. https://doi.org/10.1007/s10997-021-09613-6

Gillian, S. L., Koch, A., & Starks, L. T. (2021). Firms and social responsibility: A review of ESG and CSR research in corporate finance. Journal of Corporate Finance, 66, 101889. https://doi.org/10.1016/j.jcorpfin.2021.101889

Goodpaster, K. E., & Matthews, J. B. (1982). Can a corporation have a conscience? Harvard Business Review, 60(1), 132-141.

Gul, F. A., & Leung, S. (2004). Board leadership, outside directors’ expertise and voluntary corporate disclosures. Journal of Accounting and Public Policy, 23(5), 351–379. https://doi.org/10.1016/j.jaccpubpol.2004.07.001

Győri, Z., & Csillag, S. (2019). Vállalati felelősségvállalás és fogyatékossággal élő személyek foglalkoztatása: Külön múlt – közös jövő? 1. Rész: A kapcsolódó politikák fejlődése az EU-ban és Magyarországon. Vezetéstudomány, 50(6), 14–23. https://doi.org/10.14267/veztud.2019.06.02

Healy, P. M., & Palepu, K. G. (2001). Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature. Journal of Accounting and Economics, 31(1/3), 405–440. https://doi.org/10.1016/s0165-4101(01)00018-0

International Integrated Reporting Council. (2021). International Integrated Reporting Framework. https://www.integratedreporting.org/resource/international-ir-framework/

Jackson, G., Bartosch, J., Avetisyan, E., Kinderman, D., & Knudsen, J. S. (2020). Mandatory Non-financial Disclosure and Its Influence on CSR: An International Comparison. Journal of Business Ethics, 162(2), 323– 342. https://doi.org/10.1007/s10551-019-04200-0

Kannenberg, L., & Schreck, P. (2019). Integrated reporting: Boon or bane? A review of empirical research on its determinants and implications. Journal of Business Economics, 89(5), 515–567. https://doi.org/10.1007/s11573-018-0922-8

Kılıç, M., & Kuzey, C. (2018). Assessing current company reports according to the IIRC integrated reporting framework. Meditari Accountancy Research, 26(2), 305–333. https://doi.org/10.1108/MEDAR-04-2017-0138

Lee, K. W., & Yeo, G. H. H. (2016). The association between integrated reporting and firm valuation. Review of Quantitative Finance and Accounting, 47(4), 1221–1250. https://doi.org/10.1007/s11156-015-0536-y

Mysaka, H., Derun, I., & Skliaruk, I. (2021). The Role of Non-Financial Reporting in Modern Ecological Problems Updating and Solving. Journal of Environmental Management & Tourism, 12(1), 18–29. https://doi.org/10.14505/jemt.v12.1(49).02

Nahar, S., Azim, M., & Jubb, A. C. (2016). Risk disclosure, cost of capital and bank performance. International Journal of Accounting and Information Management, 24(4), 476–494. https://doi.org/10.1108/ijaim-02-2016-0016

Prajogo, D., Castka, P., & Searcy, C. (2021). Paymasters and Assurance Providers: Exploring Firms’ Discretion in Selecting Non-financial Auditors. Journal of Business Ethics, 173(4), 795–811. https://doi.org/10.1007/s10551-020-04539-9

Radácsi, L. (2021). Felelős és fenntartható vállalat. Saldo.

Rodríguez-Gutiérrez, P., Correa, C., & Larrinaga, C. (2019). Is integrated reporting transformative? An exploratory study of non-financial reporting archetypes. Sustainability Accounting, Management and Policy Journal, 10(3), 617–644. http://dx.doi.org/10.1108/SAMPJ-12-2017-0156

Sajtos L. & Mitev A. (2007). SPSS kutatási és adatelemzési kézikönyv. Alinea Kiadó.

Ştefănescu, C. A., Tiron-Tudor, A., & Moise, E. M. (2021). EU non-financial reporting research – insights, gaps, patterns and future agenda. Journal of Business Economics and Management, 22(1), 257–276. https://doi.org/10.3846/jbem.2020.13479

Stubbs, W., & Higgins, C. (2021). Stakeholders’ Perspectives on the Role of Regulatory Reform in Integrated Reporting. Journal of Business Ethics, 147(3), 489–508. https://doi.org/10.1007/s10551-015-2954-0

Suttipun, M. (2017). The effect of integrated reporting on corporate performance: Evidence from Thailand. Corporate Ownership and Control, 15(1), 133–142. https://doi.org/10.22495/cocv15i1art13

Tonelli, A. (2021). A text-mining analysis on the review of the non-financial reporting directive: bringing value creation for stakeholders into accounting. Sustainability, 13(2), 763. https://doi.org/10.3390/su13020763

Velte, P., & Stawinoga, M. (2017). Integrated reporting: The current state of empirical research, limitations and future research implications. Journal of Management Control, 28(3), 275–320. https://doi.org/10.1007/s00187-016-0235-4

Verrecchia, R. E. (2001). Essays on disclosure. Journal of Accounting and Economics, 32(1/3), 97–180. https://doi.org/10.1016/s0165-4101(01)00025-8

Vogel, D. (2006). The Market for Virtue—The Potential and Limits of Corporate Social Responsibility. Brookings Institution Press. https://doi.org/10.1002/bse.535

Weber, O., Koellner, T., Habergger, D., Steffensen, H., & Ohnemus, P. (2008). The relation between the GRI indicators and the financial performance of firms. Progress in Industrial Ecology-An International Journal, 5(3), 236–254. https://doi.org/10.1504/pie.2008.019127

Węgrzyńska, M. (2021). Linking of Financial Data with Non-Financial Information on CSR of Companies Listed on the Warsaw Stock Exchange. European Research Studies, 24(3), 851–873. https://doi.org/10.35808/ersj/2388

Zhou, S., Simnett, R., & Green, W. (2017). Does integrated reporting matter to the capital market? Abacus, 53, 94–132. https://doi.org/10.1111/abac.12104

Downloads

Published

2023-12-11

How to Cite

Hegedűs, S., Kardos, B., & Győri, Z. (2023). Application of EU non-financial disclosure rules to Hungarian listed companies between 2019 and 2022. Vezetéstudomány Budapest Management Review, 54(12), 24–39. https://doi.org/10.14267/VEZTUD.2023.12.03

Issue

Section

Studies and Articles