This study aims to understand the relationship between ultimate owners and the extent of water disclosure in Indonesian companies. The pressure from ultimate owners is proxied by control rights, cash flow rights and the divergence in both rights, directors and commissionaires affiliated with the owners.
Using a sample of 4,415 firm-year observations from Indonesian companies listed on the Indonesia Stock Exchange spanning the period from 2012 to 2021, the developed hypotheses are tested employing robust standard errors.
The findings show that control rights and cash flow rights significantly influence the level of water disclosure. Companies tend to disclose more water information when ultimate owners have higher control and cash flow rights. However, the divergence between both rights is understood as having no significant influence. In addition, this study reveals that companies make higher levels of water disclosure if they have no board members (director or commissionaire) affiliated with ultimate owners.
This study provides valuable insights for investors and policymakers regarding the role of ultimate owners in corporate disclosure. The findings suggest that the owners tend to align their interests with minority shareholders because they want to maximize their incentives from companies. Through their higher control rights, the ultimate owners present significant pressure to managers to perform water stewardship activities and create a higher level of corporate water disclosure.
This study contributes to the literature by providing empirical evidence on ultimate ownership and water disclosure, as no previous study has investigated this relationship. This study is important because stakeholders press companies to be responsible for the water, so water disclosure is necessary to maintain social license. Hence, ultimate owners actively press the managers to share water information to mitigate corporate risks.
