The effect of equity and bond issues on sustainability disclosure. Family vs non-family Italian firms

This paper aims to study firms’ attitudes toward using sustainability reporting for facilitating raising external capital and the effect of the ultimate controlling owner on disclosure.

A disclosure index is constructed on the basis of sustainability reports, for a sample of 230 Italian listed firms. Empirical analysis is based on panel data models.

Firms are more prone to disclose when they are planning to issue equity/bonds. Family control does not affect disclosure in the case of bond issues, but it has a moderating effect in the case of equity issuance. A family CEO, increasing the family’s sense of identification with the business, improves disclosure.

Family ownership is the most viable measure to assess its socioemotional wealth (SEW). This assesses only the dimension related to family control and influence but it does not take into account other aspects of SEW. This study focuses on the relationship between disclosure and financing choices; it does not analyze the relationship between disclosure and success of equity/bond issues.

Family firms should improve their sustainability reporting, especially for firms operating in environmentally sensitive industries. Sustainability reports could play an effective role as a control mechanism in a firm’s behavior toward the environment, society, its employees and consumers.

The paper contributes to the studies on sustainability, showing that the nature of ultimate controlling owners and firms’ financing decisions affect disclosure. Moreover, it contributes to family firms’ literature, shedding light on the effect of the family control and sense of identification with the firm on disclosure.