Determinants and economic consequences of non-financial disclosure quality: an empirical evidence from Germany

Corporate Social Responsibility (CSR) disclosure because of its voluntary nature allow managers with a significant flexibility in choosing reporting content and its style. Resultantly, there is considerable skepticism about the credibility and trustworthiness of information disclosed in CSR reports. Meanwhile this discretion is limited by the active monitoring role played by corporate governance mechanism, stakeholder involvement and regulatory implementation. Thus, considering the German context, this thesis investigates (i) the impact of external governance mechanism and implementation of Directive 2014/95/EU upon CSR disclosure quality (ii) market reaction to such disclosure. The CSR disclosure quality is measured through a composite score that is based on specific narrative features; length, verbal tone, numerical content and forward-looking content. Overall, the findings show a mixed impact of external governance mechanism whereas the implementation of directive tends to improve CSR disclosure quality. Similarly, market participants significantly respond to CSR disclosure with better quality.