Legitimacy and anti-corruption disclosures: insights into the early effects of the European Non-Financial Reporting Directive

Purpose: This study investigates corporate anti-corruption disclosure (ACD) strategies during the regulative debate surrounding the European Directive 2014/95/EU which for the first time regulated ACD in Europe. By using a legitimacy framework, it assesses whether companies improved proactively their voluntary ACD during the transposition phase to address potential regulatory changes. Moreover, it investigates how organizational and institutional factors influence companies’ reaction. Design/Methodology/Approach: We hand-collected ACD data (quantity, scope, quality and transparency) from non-financial reports for the years 2010–2015 for a set of 56 (28 EU and 28 non-EU) companies (336 firm-years observations). We apply Difference-in-Difference analysis to assess the effects of the debate. Moreover, we test the association of ACD with organizational and institutional attributes. Findings: The study shows that EU-companies are proactively changing their disclosures. The response is positively influenced by industry exposure to corruption-risks and by lower government corruption, while self-reported negative disclosure impacts negatively. Further, lower government corruption increases the effects of industry exposure to corruption-risks. However, the impacts vary with the disclosure metric. Originality/Value: Besides reinforcing legitimacy as a driving-force in shaping ACD during the transition phase to a regulated context, the paper integrates traditional legitimacy arguments with insights related to the institutional context. This contributes to improving the understanding of the empirical setting where the production of regulation occurs and can support future regulative processes