Performance and (non) mandatory disclosure : the moderating role of the Directive 2014/95/EU

Purpose: This paper investigates whether and how Directive 2014/95/EU affects financial performance as well as its moderation effect on the relationship between financial and non-financial performance, involving different stakeholders' perspectives. Design/methodology/approach: We adopted the panel data approach to perform random effects regression analysis on a sample of 435 European listed non-financial companies, considering a timeframe of six years. Furthermore, the moderation effect of the Directive 2014/95/EU on the relationship between financial and non-financial performance has been tested. Findings: NFD regulation negatively affects firms' operating profitability and shareholder value while produces no effects on debtholders' returns. Nevertheless, the Directive 2014/95/EU has general positive moderating effects on the relationship between non-financial and financial performance, mitigating the direct costs induced by pursuing non-financial performance. Research limitations/implications: Shifting from mimetic to coercive isomorphism caused a strengthening of the complementarity between financial and non-financial performance dimensions, extending the concept of performance itself. The analysis carried out is limited to a short-term timeframe and on non-financial companies subject to the Directive 2014/95/EU. Practical implications: The paper highlights trade-offs between the costs induced by non-financial activities and the benefits of being compliant with the non-financial disclosure (NFD) regulation, supporting managers in allocating business resources. Originality/value: This paper is among the first that investigates the impact of mandatory NFD on the relationship between non-financial and financial performance. It is also one of the earliest in finding some pieces of evidence on the direct impact of Directive 2014/95/EU on EU companies' financial performance.