Many studies have highlighted the role of financial, and more recently non-financial, disclosure in mitigating information asymmetries between firms and external stakeholders, but focusing primarily on large, publicly listed firms. This column exploits a 2016 Italian reform that introduced a simplified reporting regime allowing micro-firms to omit textual information on firm strategies, cost breakdowns, investment activities, and accounting choices. The reform aimed to reduce administrative burdens, but the authors find that firms adopting the simplified regime experienced reduced access to bank credit without any measurable cost savings.
The economic literature has long recognised the role of financial disclosure in mitigating information asymmetries between firms and external stakeholders. Early work by Leuz and Verrecchia (2000) and Lambert et al. (2007) shows that greater transparency can reduce the cost of capital. More recent studies have begun to investigate the effects of non-financial disclosure – such as management commentary, qualitative assessments, and sustainability reporting – on firm outcomes. Dhaliwal et al. (2011) document that voluntary non-financial reporting is associated with a lower cost of equity capital, while Ilhan et al. (2023) find that environmental disclosures attract more institutional ownership. Gibbons (2024) further shows that mandatory reporting on environmental and social issues spurs innovation and long-term investment, while Leuz et al. (2021) caution that stricter reporting requirements may have unintended consequences, such as concentrating innovation among larger firms.
Despite this growing interest, most existing evidence is based on simple conditional correlations or relies on strong identifying assumptions, and they focus primarily on large, publicly listed firms. In our recent study (Accetturo et al. 2025), we provide new causal evidence by exploiting a quasi-natural experiment created by a 2016 Italian reform. The reform introduced sharp, size-based thresholds for a simplified reporting regime that allowed eligible micro-firms to omit the nota integrativa, which is a textual section of the balance sheet detailing firm strategies, cost breakdowns, investment activities, and accounting choices. This institutional setting allows us to credibly identify the effects of reduced disclosure requirements on firm behaviour, and to address a broader question: does textual disclosure matter, or is it just cheap talk?
When less isn’t more: The hidden costs of simplified disclosure
We examine how firms responded to the option of simplified reporting by comparing otherwise similar businesses that fell just above and below the eligibility thresholds. While the reform aimed to reduce administrative burdens, we find no evidence that exempted firms experienced any measurable cost savings. Key indicators, such as the ratio of total costs to sales, and disaggregated expenditures on labour and services, remain statistically unchanged relative to non-eligible firms.
The most pronounced effects of the reform emerge not within firms’ internal cost structures, but in their external relationships. Firms that adopted the micro-firm balance sheet (MFBS) became significantly less likely to undergo ownership changes in the years following the reform; however, this negative disappears over longer time horizons. This result is consistent with the idea that the MFBS slows down, but does not eliminate, the micro-firm acquisition process; note integrative are therefore able to reduce, at least in the short run, the presence of information frictions in the equity market.
Figure 1 Ownership changes with respect to 2015
Regarding the impact on credit access, MFBS adoption causes a significant and persistent decline in the probability of having at least one loan with an Italian bank (extensive margin of credit). This effect is sizeable: a one standard deviation increase in the probability of filing the MFBS reduces the likelihood of having at least one banking linkage by 17 percentage points in 2019, which corresponds to one-third of a standard deviation of the outcome variable in the same year. The result is mainly driven by a reduction in the entry of firms that did not have a credit relationship before treatment, while the termination of existing banking relationships is unaffected.
Figure 2 Probability of having at least one bank relationship
This finding is consistent with the idea that banks use information in corporate non-financial reporting to determine firm’s creditworthiness – in other words, lower transparency of a firm results in more difficult access to credit. However, this effect has no bite if the firm already has a reputation in the credit market: the impact of the MFBS adoption on the number of banking relationships (provided that the firm has at least one bank) and the amount of credit granted (for firms with strictly positive banking loans) is not significant.
Who doesn’t need the paperwork?
Why would firms voluntarily adopt a reporting regime that offers no measurable cost savings and may limit access to finance? Our evidence suggests that take-up was more common among older, more productive firms with concentrated ownership and operating in sectors less dependent on external finance. These firms might view formal disclosure as less essential, relying instead on established reputation or internal funding capacity.
Geography also plays a role: MFBS adoption was more frequent in provinces with a higher presence of small, local banks, which tend to emphasise soft information and relationship lending. This pattern is consistent with the idea that some firms may have substituted informal trust and local connections for formal transparency.
Opaqueness may cost more than transparency
The 2016 Italian reform, which allowed micro firms to file simplified financial statements without a nota integrativa, did not lead to measurable reductions in operating costs. However, we find that firms adopting the simplified regime experienced reduced access to bank credit and lower rates of ownership turnover. These effects suggest that textual information play a role in mitigating information frictions and supporting external relationships, even among small, unlisted firms.
While the reform aimed to reduce administrative burdens, our results indicate that the informational content of qualitative reporting can have economically meaningful consequences. By limiting access to external finance and equity, reduced disclosure may result in missed growth opportunities for firms, ultimately constraining the broader economy’s dynamism. Policymakers weighing similar measures should consider not only the direct compliance costs of disclosure, but also its role in supporting business activity and economic growth.
Source: cepr.org
