Non-financial disclosure and information asymmetry: A stakeholder view on US listed firms

The purpose of this paper is to test whether the structure of non-financial disclosure, defined as the diffusion of financial, social, and environmental information as part of the dialog between a firm and its stakeholders, reduce information asymmetry. We adopt a stakeholder view of the firm to analyze the structure of non-financial disclosure along three dimensions: non-financial disclosure depth, breadth, and concentration. To operationalize the variables, we applied content analysis technique to non-financial reports released by US firms included in S&P500 index over the period 2004-2014. We combined content data and Bid-Ask spread data to test our hypotheses relying on feasible least squared (FLGS) estimation method. Results show that both the level of non-financial disclosure and the breadth of stakeholder-related themes covered in the reports reduce information asymmetry. In addition, firms that are consistent in how information is distributed across the different stakeholder categories benefit from lower opacity and reduced information asymmetry. Our findings contribute to the debate on the need to move beyond a one-fits-all approach to the study of non-financial disclosure and its related impacts.