How Does Non-Financial Disclosure Affect Firm Value and Innovation?

Innovation and sustainability have become critical factors for firms’ growth in the contemporary world. It emphasises the importance of firms investing in research and development (R&D) to achieve high technological potential, contribute to sustaining resources, and enhance firm value. These contributions by firms are also relevant for stakeholders. Thus, this study aims to examine the impact of non-financial disclosure on innovation and firm value considering the sample of listed Italian firms. The data for study variables are collected from the Bloomberg database. The final sample is based on 139 firms. The two-step generalised method of moments (GMM) technique is employed to test study hypotheses. The results show that non-financial disclosure has a positive and significant impact on innovation and firm value. Based on the findings, this study suggests practitioners consider issues related to sustainability, for instance, environmental, social, and governance (ESG) issues, as such consideration can protect stakeholders’ interests and attract investors with investment opportunities. Thus, it can help firms to invest more in R&D as well as enhance firm value.