Disclosure standards and communication norms: Evidence of voluntary disclosure standards as a coordinating device for capital markets

Abstract

In this paper, we examine how the emergence of voluntary disclosure standards can alter the nature of information available to capital market participants. Using industry-specific dictionaries of sustainability terms contained in voluntary disclosure standards developed by the Sustainability Accounting Standards Board (SASB), we find a significant increase in earnings call sustainability disclosures following the release of SASB standards, particularly for firms that had little or no coverage of sustainability issues historically. This trend begins around the time when SASB released a provisional disclosure standard for a given company’s industry and continues in the years after. We also find a stronger impact of SASB standards on sustainability disclosures of firms operating in industries with high uncertainty around sustainability reporting. Overall, these results inform our understanding of the conditions under which standards created in response to market forces are likely to affect voluntary disclosures and communication norms.

Keywords: environmental, social, and corporate governance (ESG) disclosures, sustainability, reporting standards, voluntary disclosure, earnings conference calls

JEL Classification: G2, G38, M1, M2, M4, Q5