Scoring Nonfinancial Information Reporting in Italian Listed Companies: A Comparison of before and after the Legislative Decree 254/2016

Abstract: Directive 2014/95/EU requires EU Member States to mandate nonfinancial disclosures for large public interest entities. The adoption of the Legislative Decree 254/2016, transposing into Italian law the EU Directive, has opened up new perspectives for research on the effects produced by regulatory requirements on nonfinancial information (NFI) in the Italian context. This paper aims to examine how the new regulation is influencing the quantity of NFI disclosed by Italian companies concerning sustainability matters required by the Directive. Content analysis is used to verify the sustainability indicators disclosed by Italian companies before and after the implementation of the Decree. A composite indicator of disclosure performance is then constructed using Principal Component Analysis (PCA). The results highlight a generalized reduction of indicators disclosed by companies belonging to the sample. Over the three years analysed, most companies have improved their disclosure ranking. Nevertheless, a comparison among companies having the same ranking showed a decrease in the disclosure index for the majority of them. Despite the growing attention paid by academics to Directive 95/2014/EU and its implementation in Italy, this is one of the few studies that has evaluated the effects of the Decree over three years, considering what happened after the first year of its implementation.