Authors: Evanthia Katopodi, Andreas Andrikopoulos

Title: Web-based reporting: the case of European cooperative banks

Abstract

Social finance is transforming the financial services industry and the production of public goods by the private sector. In this context, cooperative banking plays an important role in supporting cohesion and economic growth in local communities. The effectiveness of cooperative banks in performing their developmental mission is mediated via their communication with major stakeholders. In this framework, we assess the disclosure of corporate information by cooperative banks in the European Union. We constructed an index of disclosure which is estimated as the sum of 30 binary variables that relate to the banks’ corporate governance, financial performance and corporate citizenship. Our sample consists of 30 banks that are members of the European Association of Cooperative Banks. Data on disclosure was collected in 2017. Apart from estimating the extent of disclosure across European cooperative banks, we also explored the determinants of disclosure, based on financial characteristics such as size, leverage and profitability (2016 year-end financial data). We found that bank size and profitability exert a positive effect on disclosure. Bigger banks attract more interest from a wide spectrum of stakeholders and respond with increased disclosure. More profitable cooperative banks have the available financial resources to support an effective communication with stakeholders who raise questions of social legitimacy, thereby ending up disclosing larger amounts of information. Finally, we discovered that financial leverage is negatively associated with the amount of disclosed environmental information: increased leverage commits large amounts of bank resources to the repayment of financial obligations and limits the resources that are available for communicating with the stakeholders.