“Sustainability-related disclosure rules and financial market indicators: Searching for interconnections in developed and developing countries”

In today’s fast-paced business environment, integrating sustainability into financial decision-making has been a key driver of change. As stakeholders increasingly demand greater corporate transparency and accountability, regulatory bodies have stepped in to ensure that sustainability reporting is standardized and robust. This paper aims to establish the relationship between the sustainability-related disclosure rules and the dynamic indicators of the financial market. The object of the study is 74 countries of the world, which are grouped into developed and developing countries. The time period is 2021, for the stock market capitalization indicators – 2020, as the most recent years with available data. The research methods are normality tests (Shapiro-Wilk and Shapiro-Francia test), comparison methods (Student’s t-test and Mann-Whitney U test, regression analysis with dummy variables), linear and non-linear correlation and regression analysis (logarithmic, polynomial). The results obtained confirmed that the sustainability-related disclosure rules are higher in developed countries than in developing ones. At the same time, in developed countries, the growth of such requirements affects the increase in stock price volatility, stock market capitalization, foreign direct and portfolio investments. For developing countries, there is also an increase in the stock market capitalization, portfolio investments and the volume of stock trading. Recognizing these trends can benefit both financial market regulators and participants to encourage the formation of a transparent and efficient financial market, thereby mitigating the problems associated with information asymmetry.


INTRODUCTION
One of the essential factors in promoting transparency, information efficiency and leveling out information asymmetry in financial markets is the impact of regulatory requirements on the disclosure standardization of sustainability reporting by companies.Moreover, the influence of this factor has an additional effect on overcoming the investment gap in achieving Sustainable Development Goals (SDG), promoting circular economy (Ievdokymov et al., 2018) and accelerating responsible investments (RI).
Adverse geopolitical and socio-economic events such as wars (mainly due to the full-scale Russian invasion of Ukraine), the global consequences of the COVID-19 pandemic, and the threat of climate change have exacerbated the problem of the already insufficient financing of the SDGs.According to the UN report of the Inter-Agency Task Force, the current regress in achieving the SDGs is estimated as the loss of an entire decade (UN, 2022).In developing countries, the investment gap in achieving the SDGs increased by more than half of the current level (56%) to USD 3.9 trillion in 2020 (OECD, 2022).Furthermore, today the situation is only getting worse, creating cascading reactions in other sectors of the economy.These prerequisites formed the basis for the rapid development of various global and local responsible investment initiatives that strengthen and direct the financial flows of ESG assets into sustainable investment strategies and solutions.According to Bloomberg (Bloomberg Professional Services, 2023), it is predicted that by 2025 their share will increase to a third in the total volume of assets under management.At the same time, according to the data of the UN Principles for Responsible Investment (PRI) project, there has been significant growth in the regulatory regulation of responsible investment over the past two decades.In 2021, the PRI database included more than 868 regulatory instruments and guidelines, and more than 300 policy reviews were conducted to support and stimulate the consideration of CSR, SDG and ESG criteria during RI (UNPRI, 2023).In this regard, the RI regulatory and standardization sector is also rapidly developing, which will contribute to forming a transparent and efficient financial market.

LITERATURE REVIEW AND HYPOTHESES
As concerns over environmental degradation, social responsibility, and corporate governance have gained prominence, the relationship between sustainability-related disclosure rules and financial market indicators has become a subject of extensive research.
A separate thematic block of scientific research traces the historical development of sustainability disclosure rules (Bose, 2020

METHODOLOGY
The information base of this study was sustainability-related disclosure rules and financial market dynamic indicators ( Cumulative RI disclosure policy instruments in terms of corporate and investor ESG disclosure, investor ESG integration, mandatory and voluntary RI regulatory instruments were selected as independent variables.All these data were taken from the latest version of the PRI database.Indicators characterizing the dynamics of the financial market were chosen as dependent variables.
The following statistical and econometric methods were used to test the above hypotheses ( all data were tested for normal distribution using the Shapiro-Wilk and Shapiro-Francia tests, which revealed signs of nonlinearity.The logarithm and elevation to the square were used to eliminate it, which resulted in the need to conduct a nonlinear correlation and regression analysis.
Statistical tests based on comparisons, namely the parametric Student's t-test and the non-parametric Mann-Whitney U-test, were used to test the first hypothesis, which involves comparing two groups of indicators within the same sample.A regression analysis with dummy variables was performed to confirm the obtained results, which can be mathematically represented as follows: where i Y -the dependent variable of the model, in this case -indicators of the level of sustainabili-ty-related disclosure rules; α -free term of the equation; β -a coefficient for a dummy variable; i D -dummy variable in the form of a binary value 0 -for developing countries and 1 -for developed countries; ε -random error.

RESULTS AND DISCUSSION
Investigation of hypothesis H1 regarding the level of sustainability-related disclosure rules in developed and developing countries requires comparing variables using the statistical Student's t-test and U Mann-Whitney U test (Table 3).For this, the null hypothesis (H th0 ) is assumed that the mean values for the two samples are the same.
The results, which are statistically significant, showed that the averages for most indicators regarding the level of sustainability-related disclo- In addition to the statistical tests, a regression analysis with dummy variables was carried out (Table 4).Despite the low and average values of the coefficients of determination, the obtained results are statistically significant and adequate.It should be noted that, on average, developed countries have 6.8 units more RI regulatory instruments in the cumulative total than developing countries.In particular, 4.4 units more corporate ESG disclosures, 3 units more investor ESG disclosures, etc.
In the context of mandatory or voluntary RI regulatory instruments, a higher number is observed for the former.As a result, hypothesis H1 is fully confirmed, so the sustainability-related disclosure rules are higher in developed countries than in developing countries.
The results of identifying the relationship between the growth of sustainability-related disclosure rules and the level of stock price volatility using correlation and regression analysis within the limits of hypothesis H2 are shown in Table 5.
The   ship, i.e., a unit increase in RI disclosure policy instruments (disclinstr) is predicted to lead to an increase of 0.276 units the level of stock price volatility.Similarly, growth of 0.550 and 0.423 units for stock price volatility are predicted from corporate ESG disclosure (cordESGd) and mandatory RI regulatory instruments (mndt) increases.
In this regard, hypothesis H2.1 is considered to be rejected because, in developed countries, the sustainability-related disclosure rules contribute to an increase in stock price volatility due to corporate ESG disclosure and mandatory RI regulatory instruments.Hypothesis H2.2 is also considered to be rejected due to the absence of revealed regularities at all.
When testing the H3 hypothesis regarding the relationship between the growth of sustainability-related disclosure rules and the increase in stock market capitalization, only the non-linear dependence based on the logarithm was statistically significant for developed countries (Table 6).Thus, a 1% increase in investor ESG integration will lead to a 0.73% increase in stock market capitalization.
On the other hand, for developing countries, an increase per unit of RI regulatory instruments is predicted to lead to an increase of 5 units of stock market capitalization, mainly due to investor ESG integration and mandatory instruments.Note that the correlation coefficient indicates a moderate influence, and the coefficient of determination explains about 20-27% of the variance within this dependence.
Thus, hypotheses H3.1 and H3.2 are confirmed because the growth of sustainability-related disclosure rules in developed countries and developing countries contributes to the increase of stock market capitalization at the expense of investor ESG integration, corporate ESG disclosure and mandatory RI regulatory instrument.
The study of the relationship between the growth of sustainability-related disclosure rules and the level of S&P global equity indices using correlation and regression analysis tools showed the absence of any statistically significant and adequate results between the analyzed variables both at the level of developed and developing countries.
Considering the obtained results, hypotheses H4.1 and H4.2 are considered to be rejected.
The search for interrelationships between the level of sustainability-related disclosure rules and the amount of portfolio investment attraction within the limits of hypothesis H5 testified to the presence of not only linear but also non-linear dependencies (in particular, polynomial of the second degree), the results are shown in Table 7.
The cumulative RI disclosure policy instruments can predict 15.9% of the variance of the portfolio investments for developed countries and 28.6% for developing countries.The obtained regression coefficients indicate that for developed countries, the increase in the RI disclosure policy instruments (disclinstr) has a negative effect on the portfolio investments at low values, after which the effect changes to a positive one.The inverse dependence is observed for developing countries.
For developed countries, there is a direct positive correlation with investor ESG disclosure and integration (explaining more than 11.6% and 13.9% of the variance).In particular, the growth per unit of investor ESG disclosure (invESGd) or investor ESG integration (invESGi) is predicted to lead to an increase of 11.8 and 18.0 billion US$, respectively, attracting portfolio investments.
Non-linear relationships were also found for developing countries with investor ESG disclosure, mandatory and voluntary RI regulatory instruments.At the same time, at low values, the dependence was revealed as positive, and at high values, as negative.
As a result, hypothesis H5.1 is confirmed because indeed, for developed countries, the growth of sustainability-related disclosure rules under certain conditions increases the portfolio investments.Hypothesis H5.2 can instead be rejected because an increase in the number of regulatory instruments has an inverse dependence on the involvement of portfolio investments.
Hypothesis H6.1 test confirmed that the growth of sustainability-related disclosure rules for devel-oped countries contributes to the increase in foreign direct investments (Table 8).
In particular, ceteris paribus, a unit increase in RI disclosure policy instruments (disclinstr) leads to an increase of 3 billion US$ in foreign direct investments, which is carried out in particular at the expense of corporate ESG disclosure and voluntary RI instruments.At the same time, only 10-17% of the variance is explained by these variables, the correlation coefficients also confirm a moderate positive relationship.
For developing countries, the growth of sustainability-related disclosure rules has an inverse effect on foreign direct investments.In particular, a one-unit increase in the cumulative RI regulatory instruments is predicted to lead to a decrease in foreign direct investments by USD 4.5 billion.The most significant reduction is predicted due to corporate ESG disclosure, mandatory and voluntary  RI regulatory instruments have a significant negative impact on attracting foreign direct investments.Thus, hypothesis H6.2 is refuted.
The results of testing hypothesis H7 regarding the relationship between the growth of sustainabilityrelated disclosure rules and the increase in the volume of share trading are shown in Table 9.
No statistically significant and adequate results were found regarding the relationship between sustainability-related disclosure rules and the volume of stocks trading at the level of developed countries.On the other hand, for developing countries, it is noted that a unit increase in RI disclosure policy instruments (disclinstr) is predicted to lead to a 5.7% increase in the volume of stock trading, while the coefficient of determination is 67.3%.Also, a positive impact was noted due to the growth of corporate and investor ESG disclosure.Mandatory and voluntary RI regulatory instruments have a significant impact (more than 10%) on stocks traded.
Therefore, the growth of sustainability-related disclosure rules contributes to the increase in the volume of stocks traded exclusively in developing countries.The obtained results are summarized in Table 10.
Thus, the level of sustainability-related disclosure rules is higher in developed countries compared to

Hypothesis Result Description
H1 confirmed The level of sustainability-related disclosure rules is higher in DC compared to DPC

H2.1 rejected
In DC, the growth of sustainability-related disclosure rules contributes to an increase in stock price volatility due to corporate ESG disclosure and mandatory RI regulatory instruments.

H2.2 rejected
In DPC, no statistically significant relationship between the growth of sustainability-related disclosure rules and stock price volatility was found.

H3.1 confirmed
In DC, the growth of sustainability-related disclosure rules contributes to the increase of stock market capitalization due to investor ESG integration.

H3.2 confirmed
In DPC, the growth of sustainability-related disclosure rules contributes to the increase in stock market capitalization of the market at the expense of investor ESG integration, corporate ESG disclosure, mandatory RI instruments.

H4.1 rejected
In DC, no statistically significant relationships were found between the growth of sustainability-related disclosure rules and the level of S&P global equity indices

H4.2 rejected
In DPC, no statistically significant relationships between the growth of sustainability-related disclosure rules and the level of S&P global equity indices were found

H5.1 confirmed
In DC, the growth of sustainability-related disclosure rules under certain conditions contributes to an increase of portfolio investments, in particular due to investor ESG disclosure and investor ESG integration.

H5.2 rejected
In DPC, the growth of requirements for sustainability-related disclosure rules (in particular, due to investor ESG disclosure, mandatory and voluntary RI regulatory instruments), on the contrary, leads to a decrease in portfolio investments.

H6.1 confirmed
In DC, the growth of sustainability-related disclosure rules helps to increase foreign direct investments due to corporate ESG disclosure and voluntary RI regulatory instruments.

H6.2 rejected
In DPC, the growth of sustainability-related disclosure rules has an inverse effect on foreign direct investments, mainly due to corporate ESG disclosure, mandatory and voluntary RI regulatory instruments.

H7.1 rejected
In DC, no statistically significant relationships were found between sustainability-related disclosure rules and the volume of stocks traded.

H7.2 confirmed
In DPC, the growth of sustainability-related disclosure rules positively affects the volume of stocks traded, mainly due to corporate ESG disclosure, mandatory and voluntary RI regulatory instruments.In both cases, ESG disclosures contributed to the minimization of volatility, information asymmetry and manifestations of the anomaly of the efficient market hypothesis.However, a similar study was not conducted for the Ukrainian market.Separate works of the author relate to the analysis of similar anomalies in world markets (Plastun et al., 2020).
The current study is a continuation of two previous ones that examined the relationship between ESG disclosure regulation and a country's competitiveness (Plastun et al., 2019) and its SDG ranking (Plastun et al., 2020).However, the context of the study of such regulation's impact on the financial market parameters was not disclosed.In this case, the research question is whether the regulatory requirements for the standardization of the regulation of disclosure of information on sustainable development affect the indicators of the financial market.
The answer to this question gives an idea of the future ways of standardization in the field of sustainable development and synergy in the development of the financial market and the RI market in the countries of the world and Ukraine.

CONCLUSION
This study is devoted to identifying the relationship between sustainability-related disclosure rules and the dynamic indicators of the financial market of developed and developing countries.Independent variables were the cumulative amount of disclosure policy instruments in general and their specifications on corporate ESG disclosure/investor ESG disclosure/investor ESG integration and mandatory/ voluntary regulatory instruments for RI.Indicators characterizing the dynamics of the financial market are included in the dependent variables (in particular, stock price volatility, stock market capitalization to GDP, S&P global equity indices, portfolio investments, foreign direct investments, stocks traded).
The results show that the level of sustainability-related disclosure rules is significantly higher in developed countries compared to developing ones.The work confirms that in developed countries, the growth of sustainability-related disclosure rules contributes to the increase in stock price volatility (in particular, due to corporate ESG disclosure, mandatory regulatory instruments), stock market capitalization (due to investor ESG integration), portfolio investments (through investor ESG disclosure and ESG integration), foreign direct investments (at the expense of corporate ESG disclosure, voluntary regulatory instruments).However, the growth of the total cumulative number of RI regulatory instruments has a negative effect on the volume of portfolio investment attraction at low values, after which the effect changes to a positive one.
For developing countries, an increase in sustainability-related disclosure rules per unit is predicted to lead to an increase in stock market capitalization (in particular due to corporate ESG disclosure, investor ESG integration, mandatory regulatory instruments), portfolio investments (through ESG disclosure, mandatory/ voluntary regulatory instruments) with low values, stock trading (through corporate ESG disclosure, investor ESG disclosure, mandatory and voluntary regulatory instruments).At the same time, the growth of sustainability-related disclosure rules will lead to a decrease in the volume of direct foreign investments (due to corporate ESG disclosure instruments, mandatory/voluntary regulatory instruments) Considering these patterns will be useful for financial market regulators and their participants, as it will create a more transparent and efficient financial market and avoid information asymmetry.

Table 1 .
Characteristics of the input data

Table 3 .
Results of statistical tests to test hypothesis Н1 analysis allowed identifying statistically significant relationships only at the level of developed countries, no similar relationships were found for developing countries.At the same time, the coefficients of determination acquired low values: cumulatively, the number of RI disclosure

Table 4 .
Results of regression analysis with dummy variables to test hypothesis Н1 Note: * -statistically significant at the level (p) <0,05.

Table 5 .
Results of correlation and regression analysis to test hypothesis Н2 Note: * -statistically significant at the level (p) <0,05.

Table 7 .
Results of correlation and regression analysis to test hypothesis Н5 Note: * -statistically significant at the level (p) <0,05.

Table 9 .
Results of correlation and regression analysis to test hypothesis Н7