Board composition and textual attributes of non-financial disclosure in the banking sector: Evidence from the Italian setting after directive 2014/95/ EU

More and more, the finance and the financial sector are used as a means of achieving social goals. Thus, the main financial market participants are required to change their ESG identity and to act no longer only as a seller of sustainable products, but also as sustainable actors themselves. For this purpose, banks and financial institutions are required to complement financial information with environmental, social, and governance (ESG) statements to provide a wider overview of the value creation process. Despite the banking sector being of utmost importance in the promotion of a transition towards sustainable economic development, the analysis of the attributes of their non-financial disclosure (NFD) has achieved little attention from scholars thus far. This paper aims at investi-gating the relationships between board composition and some textual attributes of NFDs by testing the incre-mental information vs. impression management approach in the Italian banking sector for the years 2017-2020, after the introduction of Directive (2014)/95/EU. The final sample is composed of 29 Italian banks. A two-step analysis was conducted. In the first stage, a content analysis was performed to assess the textual attributes of the disclosures, and in the second a multivariate regression model with panel data was run. Empirical findings found a significant impact of board composition and textual attributes on conciseness, completeness, positive tone, and the reading difficulty of NFDs. Results from this study contribute to the literature on disclosure strategies and theories by providing additional knowledge on the role of certain characteristics of corporate governance in explaining some textual attributes of NFDs in the financial sector. Managerial implications are related to the (re-) design of some governance features which are more suitable in providing a more transparent and comparable NFD. Policy implications are related to the development of policies and regulations at the international level that combine high-quality sustainability-related information and the governance features of financial institutions.