The inverted U-shaped relationship between company size and reporting quality: The Italian case

Abstract

The aim of this paper is to explore sustainability reporting in the Italian environment, with a special attention to the determinants of disclosure quality. More specifically, this paper’s objective is to test the impact on the quality of sustainability reporting made by elements through which legitimacy can be connected, with particular reference to firm size. The choice of analysing the Italian companies lies in the fact that in this country, in a particular way, and more in general, in the non-Anglophone countries, there is no consolidated literature on the subject. The statistical analysis we carried out on this paper, in order to test the research hypotheses, is based on a linear regression model. Particularly relevant is the finding, liked to size, of the inverted U-shaped relationship. Previous contributions had highlighted a positive relationship between size and quality of sustainability reporting, connected to higher pressures by the external context on the bigger firms. Instead, our study has highlighted an inversion of such relationship (from positive to negative), starting from a certain value of market capitalization. The finding of the statistical insignificance of the relationship between industry and sustainability reporting is also very interesting.