Corporate non‑financial disclosure, firm value, risk, and agency costs: evidence from Italian listed companies

This study examines the relationship between corporate non-financial disclosure ratings, the Italian Legislative Decrees 231/2001 and 254/2016, and three outcomes of Italian listed firms: performance, risk and agency cost. Based on stakeholder–agency theory, this study conceptualizes the role of firms’ non-financial disclosures in reducing asymmetric information and agency costs between managers and broad stakeholders. Utilizing the Standard Ethics Rating (SER) as a measure of firms’ non-financial disclosure rating, this study finds that SER ratings are positively related to firm value and are negatively related to firms’ risk and agency costs. This study also provides evidence that the adoption of Italian Legislative Decrees 231/2001 and 254/2016, along with external verifications from the SER of firms’ non-financial disclosure, has a positive impact on firm outcomes. Corporate managers and investors should recognize the value added from regulations that foster non-financial disclosures and ratings issued by an independent rating agency (e.g., Standard Ethics) as they both enhance firm performance and reduce risk and agency costs.