Does National Culture Drive the Value Relevance of Nonfinancial Disclosure?

Abstract

The aim of this paper is to investigate the association between national culture and the value relevance of nonfinancial disclosure provided by listed firms in Germany, Spain, France, and Italy from 2018 to 2023. The results of Hierarchical Linear Model regressions show that, in countries where the national culture is characterized by greater power distance, individualism, masculinity, and indulgence, nonfinancial disclosure is less value-relevant for market investors. Instead, in countries where the national culture is characterized by greater uncertainty avoidance and long-term orientation, nonfinancial disclosure is more value-relevant for market investors. This study will be helpful to standard-setters, regulators, investors, and academics interested in knowing potential country-based incentives or constraints to the market valorization of corporate nonfinancial disclosure during a unique historical period, especially considering the introduction of the proposed Corporate Sustainability Reporting Directive and the current geopolitical setting.