While economies continue to recover from the pandemic, researchers believe they have found one upside from the ravages of Covid-19: improved disclosures.
An examination of disclosures by listed companies in New Zealand reveals that, as the pandemic brought business to a halt across the world, corporate CSR disclosures improved by up to 28%.
The academics were investigating whether uncertainty caused by Covid-19 prompted managers to decrease “information asymmetry” with better reporting.
After looking at press statements from 125 firms listed in New Zealand, the researchers found that reporting did indeed improve.
The team writes: “Our findings suggest that effective monitoring…demonstrated by a well-structured board (a large, more independent board and with a large proportion of women) significantly enhances the positive relationship between Covid and CSR disclosure.”
Health check
The paper may be the first to look at the impact of Covid-19 on corporate disclosures. Other studies have looked at issues such as stock return and the reaction of stock exchanges during the pandemic.
The researchers, Stephen Bahadar and Rashid Zaman, also found that disclosures improved through government pressure, or “stringency”, peer pressure and media coverage.
The results show that “strong board monitoring lowers information asymmetry and encourages managers to increase CSR disclosure in response to Covid-19,” the authors write.
In the UK, watchdogs at the Financial Reporting Council repeatedly warned companies to be candid about their reporting during the Covid crisis, though these were focused on issues such as “going concern” risk and viability reporting.
The coronavirus prompted a wave of research looking at management responses to the pandemic. One tranche of research has looked at the response from boards on executive pay after pledges that corporate leadership would share the pain their employees experienced.
Painful truths
Successive studies have shown leaders escaped the worst of the pay cuts, often through an increase in perks of one kind or another . One study went so far as to label CEO pay cuts as “fake”.
There were concerns that many ESG priorities were discarded as businesses fought for survival during the initial stages of the pandemic. Some observers worried that focus on diversity could be an early casualty of the return to “normality”as companies recovered from the crisis.
Whatever the outcome of the pandemic, it has proved a huge experiment in testing the resilience of companies and their commitment to a host of contemporary concerns. We can expect more lessons in the coming years.