Disclose or Not Disclose? An Investigation into The Relationship between Corporate Governance Mechanisms and Impression Management in The Sustainability Reporting

Abstract

The main purpose of this research is to examine the relationship between corporate governance mechanisms, in terms of specific governance scores, and the tendency to use impression management techniques in sustainability reporting, measured by several aspects, such as the level of optimism, positive words, and negative words. This analysis includes several control variables to observe the influence at the company level. The research hypotheses are tested using a sample consisting of companies from Eastern European geographical areas and non-financial industries. The time frame analyzed is the period between 2022 and 2023, and regression models estimated for panel data using random-effects are applied. The findings draw a clear picture of the impact exerted by corporate governance mechanisms on impression management, demonstrating that governance, management, and shareholders' scores have a positive influence on the level of optimism, while positive and negative words exposed in sustainability reporting are significantly influenced by management and CSR strategy scores. Results summary may have implications for business and academic environments. Thus, company representatives could be interested in what corporate governance practices may be applied to avoid and anticipate the impression management tendency, while for academics, this study represents a valuable resource in terms of present and future research.