Sustainability disclosure, dominant owners and earnings informativeness

Focusing on an environment where ownership concentration is prevalent and where sustainability disclosure is not a new phenomenon, we investigate the effect that communication via social responsibility reporting has on earnings informativeness. We further address the moderating role of the dominant owner's voting-cash flow wedge in the relation between sustainability disclosure and earnings informativeness.We show that communication via social responsibility reporting provides additional information to market participants to assess earnings informativeness. Furthermore, we show that the positive relationship between sustainability reporting and earnings informativeness intensifies as the dominant owner's voting-cash flow wedge increases. Our results are consistent with sustainability disclosure reducing investors' and other stakeholders' uncertainty, thereby helping them better interpret financial information.

82