This study investigates how the European Union (EU) Directive (2014/95) on Non-Financial Reporting and employee representation within the board affects the extent and quality of employee-related disclosures. Using a sample of Swedish firms listed on the Nasdaq OMX Stockholm Exchange, we find that both the Directive and employee representation on the board positively affect the extent and quality of disclosures on employee-related matters. We document that employee-related disclosures are more precise and less uncertain among firms with employee representatives, although the level of uncertainty increases after implementing the Directive. Moreover, our interaction analysis indicates that the Directive and employee representatives affect employee-related disclosures independently. This finding suggests that both internal corporate governance and external regulation are important, and that the Directive ensures a minimum extent of disclosures at firms that lack internal governance mechanisms (i.e. employee representation on their corporate boards).

The European building stock was renewed at a rapid pace during the period 1950–1975. In many European countries, the building stock from this time needs to be renovated, and there are opportunities to introduce energy efficiency measures in the renovation process. Information availability and increasingly available analysis tools make it possible to assess the impact of policy and regulation. This article describes methods developed for analyzing investments in renovation and energy performance based on building ownership and inhabitant socio-economic information developed for Swedish authorities, to be used for the Swedish national renovations strategy in 2019. This was done by analyzing measured energy usage and renovation investments made during the last 30 years, coupled with building specific official information of buildings and resident area characteristics, for multi-family dwellings in Gothenburg (N = 6319). The statistical analyses show that more costly renovations lead to decreasing energy usage for heating, but buildings that have been renovated during the last decades have a higher energy usage when accounting for current heating system, ownership, and resident socio-economic background. It is appropriate to include an affordability aspect in larger renovation projects since economically disadvantaged groups are over-represented in buildings with poorer energy performance.

We investigate to what degree employee representatives contribute to the board’s monitoring of earnings quality. We argue that employee representatives have incentives to prevent earnings manipulations motivated by negotiation considerations. Furthermore, they seek risk reducing policies, have a long-term interest in their firm and possess firm-specific knowledge, which in turn can result in improved earnings quality. Employee representation also increases the diversity on the board, which can enhance the board of directors’ internal communication and monitoring. Using a sample of firms listed on the Stockholm Stock Exchange (2006–2014), we find lower abnormal accruals as well as less excessive R&D cuts in firms with employee representation, controlling for alternative model specifications and potential sample selection bias. Moreover, we find less income-decreasing abnormal accruals in firms with employee representatives during the 2010-2011 collective bargaining period. This study also reveals that earnings quality varies with the characteristics of employee representatives. Our findings contribute to the literature on boards’ monitoring and financial reporting quality, as it examines a less noticed aspect of board diversity, i.e. employee representation.

The board of directors is key to monitoring management, but the asymmetric information between the board and management is an obstacle to effective monitoring. Using a sample of firms listed on the Stockholm Stock Exchange, this study investigates to what degree employee representatives contribute to the board’s monitoring of financial reporting. Controlling for alternative model specifications and potential sample selection bias, we find evidence for lower abnormal accruals in firms with employee representation. This suggests that firms with employee representation are less engaged in earnings management. Additional tests show that both income-increasing and income-decreasing earnings management occur less frequently in firms with employee representation.