Article content
1. Introduction
In recent years, alongside the growing emphasis on sustainable development and the transition toward a circular economy model, circular economy disclosure (CED) has received increasing attention from academics, managers, and stakeholders. International studies have emphasized that such disclosure not only enhances transparency but also serves as a means of communicating a company's sustainable development strategy to the market. Internationally, the growing importance of the circular economy has stimulated increasing academic interest in how firms communicate their circular economy practices and performance to stakeholders (Vitolla et al., 2023; Esposito et al., 2023). Nevertheless, CED research remains at an early stage, with relatively few studies examining its determinants (Vitolla et al., 2023).
Internationally, numerous studies have focused on assessing the level and content of circular economy information disclosed through sustainability reports or integrated reports. Previous studies indicate that, although the number of businesses disclosing circular economy-related information is increasing, the level of detail, consistency, and verifiability of such information remains limited. Some studies show that the disclosed content is often descriptive and lacks unified guidelines and standards, leading to significant differences among firms and across industries (Vitolla et al., 2023; Esposito et al., 2023).
Furthermore, studies have shown that circular economy disclosure often does not fully reflect the actual practices of businesses during their transition to a circular economy model. This indicates a significant gap between actual implementation and the level of disclosure reflected in corporate reports (Gunarathne et al., 2021; Leggerini et al., 2025). In addition, the lack of common reporting standards for measuring and disclosing circular economy information makes comparisons among firms and across studies difficult (Vitolla et al., 2023).
Another important research stream focuses on identifying factors that influence circular economydisclosure. International studies indicate that firm business characteristics (size, profitability, financial leverage), corporate governance mechanisms (Board of Directors, Audit Committee), and institutional factors (policies, regulations) can significantly influence the level of CED. For example, Vitolla et al. (2023) document the role of firm characteristics in explaining CED, while Esposito et al. (2023) provide evidence that corporate governance mechanisms are associated with the level of circular economy information disclosed by firms. Larger firms with strong financial performance tend to disclose more information because they face greater stakeholder pressure and have sufficient resources to implement circular economy-related activities. Conversely, firms with high financial leverage may limit disclosure because of financial pressure and risks.
Furthermore, recent studies also highlight the role of corporate governance mechanisms in improving disclosure quality. Large boards of directors with a high proportion of independent directors and more frequent meetings may have stronger oversight capacity, thereby promoting transparency. Similarly, audit committees play a crucial role in supporting the integrity and reliability of disclosed information, especially as integrated reporting and sustainability reporting become more common. Previous evidence supports the relevance of governance mechanisms to non-financial disclosure. In the specific context of circular economy disclosure, Esposito et al. (2023) find that board characteristics and governance mechanisms are associated with the amount of CE information disclosed through integrated reports.
In Vietnam, research on the circular economy and sustainability-related disclosure has begun to emerge in recent years, mainly focusing on adoption trends and influencing factors. Research findings suggest that the level of circular economy disclosure among Vietnamese firms remains relatively limited and uneven. Some studies indicate that firm size, stakeholder pressure, and government policies are important drivers of circular economy disclosure.
More specifically, Phan et al. (2024) examined environmental and circular economy disclosure in 32 Vietnamese listed companies during 2018–2022. The study found that government ownership and Big Four audit services were positively associated with disclosure, while several other firm and governance characteristics showed no significant effects. However, empirical evidence on the determinants of circular economy disclosure in Vietnam remains limited.
Furthermore, domestic studies emphasize the role of corporate culture, managerial awareness, and institutional factors in shaping information disclosure behavior. However, most studies remain qualitative or focus on individual aspects, with few quantitative studies simultaneously examining groups of factors such as corporate governance, financial characteristics, and external pressures.
It is noteworthy that, although international reporting frameworks such as GRI, CDP, and IIRC have been introduced and adopted in Vietnam, their implementation remains voluntary and inconsistent across firms. This results in differences in the content and quality of disclosure, and limits investors' ability to compare and evaluate disclosed information.
Overall, it can be observed that previous studies have provided an important foundation for understanding the role and significance of circular economy disclosure. However, some significant research gaps remain. Firstly, the number of quantitative studies in Vietnam is limited, especially those using panel data to examine the impact of multiple groups of factors simultaneously. Secondly, the role of corporate governance mechanisms, particularly the Board of Directors and the Audit Committee, has not been fully analyzed in the context of circular economy disclosure. Thirdly, the differences between firms in terms of information disclosure levels have not been comprehensively explained.
However, empirical studies in Vietnam that simultaneously examine Board of Directors characteristics, Audit Committee characteristics, and firm-specific financial characteristics remain limited. This study therefore examines these factors in the context of Vietnamese listed firms.
Based on these research gaps, this study aims to analyze the factors influencing the level of circular economy disclosure in Vietnamese listed firms, focusing on the role of corporate governance mechanisms and financial characteristics. The study is expected to contribute empirical evidence to the literature by providing a more comprehensive examination of CED determinants in an emerging-market context and to support managers and firms in enhancing transparency and promoting sustainable development.
2. Theoretical Foundation and Research Hypotheses
2.1. Circular Economy Disclosure
The circular economy is becoming an increasingly important development approach in the context of growing environmental problems, resource depletion, and climate change. The concept of the circular economy emerged in the 1990s, with foundational contributions from Pearce and Turner (1990), emphasizing the transition from the traditional linear economic model to a closed-loop economic model in which waste from one process becomes an input for another. This approach aims to optimize resource use, extend product life cycles, and minimize negative environmental impacts.
International organizations have continued to refine and expand this concept. The Ellen MacArthur Foundation (2013) proposed three core principles of the circular economy, including (i) design aimed at eliminating waste and pollution in the first place; (ii) maintaining products and materials in the circular cycle through reuse, repair, and recycling; and (iii) restoring natural systems. Similarly, the European Commission (2015) emphasized the role of maintaining the value of products and resources in the economy for as long as possible while minimizing waste generation. The OECD (2020) further noted that the circular economy is also linked to sustainable design, technological innovation, and resource cycle optimization.
In Vietnam, the concept of a circular economy has been incorporated in the 2020 Law on Environmental Protection[1]. According to this law, a circular economy is defined as an economic model in which production and consumption activities are organized to reduce resource exploitation, extend product life cycles, limit waste generation, and minimize negative impacts on the environment. This indicates that the circular economy is not just a production model but also a comprehensive development strategy linked to the goal of sustainable development.
Corporate disclosure includes financial and non-financial information provided by firms to stakeholders. It is an important means of reducing information asymmetry and providing stakeholders with information about corporate activities and performance (Healy & Palepu, 2001). In addition to financial information, firms increasingly disclose environmental and social information related to their activities and practices (Clarkson et al., 2008).
Based on this theoretical foundation, circular economy disclosure (CED) refers to the information disclosed by firms regarding the application of the circular economy model in their operations. This information reflects how businesses manage resources, organize production and consumption in a sustainable manner, and demonstrates their level of commitment to environmental and social goals. In this regard, CED can be understood as the corporate communication of information concerning circular economy strategies, practices, initiatives, and performance to stakeholders through corporate reporting channels (Esposito et al., 2023; Vitolla et al., 2023).
Circular economy disclosure typically encompasses different aspects (Esposito et al., 2023; Vitolla et al., 2023). First, it includes information on resource utilization, such as materials, energy, water, and other input resources, with an emphasis on resource efficiency and conservation. Second, it includes information on waste and emissions, including greenhouse gas emissions (Scope 1, Scope 2, Scope 3), air pollution emissions, and measures to control and mitigate pollution. Third, it includes information on sustainable innovation and design, reflected in the development of environmentally friendly products, recycling programs, and product recovery and reuse. Fourth, it includes information on environmental compliance and governance, including compliance with legal regulations, the application of sustainability standards, and the evaluation of environmental management effectiveness.
Circular economy disclosure is the process by which businesses publicly disclose this information to stakeholders through channels such as annual reports, sustainability reports, or integrated reports. Information disclosure is not simply about providing data; it also plays a crucial role in conveying the company's strategy, long-term orientation, and commitment to sustainable development.
Previous studies have shown that circular economy disclosure offers significant benefits to firms (Esposito et al., 2023; Vitolla et al., 2023). In particular, circular economy disclosure enhances transparency and accountability, thereby reducing information asymmetry between businesses and stakeholders (Dhaliwal et al., 2011; Vitolla et al., 2023). In addition, circular economy disclosure supports investors and regulatory bodies in assessing the level of commitment to sustainability practices and the effectiveness of environmental initiatives. Furthermore, circular economy disclosure helps firms enhance their reputation, improve their image, and create a competitive advantage in the market (Salvioni & Almici, 2020).
Furthermore, circular economy disclosure is often based on international reporting frameworks such as GRI Standards, the Integrated Reporting Framework, or guidelines related to sustainability reporting. These frameworks provide principles and criteria that help firms standardize the content of their disclosures, enhancing the comparability and reliability of the information.
However, previous studies show differences in the level and quality of circular economy disclosure among firms (Esposito et al., 2023; Vitolla et al., 2023). These differences may be associated with firm characteristics, corporate governance mechanisms, and reporting practices. Therefore, it is important to examine the factors that influence circular economy disclosure.
Overall, the theoretical framework suggests that the circular economy and circular economy disclosure are closely interconnected concepts associated with firms’ transition toward sustainable development. Studying the factors influencing circular economy disclosure has important theoretical and practical implications for improving information quality, supporting stakeholder decision-making, and promoting sustainable development.
2.2. Theoretical Perspectives
The study is built upon two theoretical foundations: stakeholder theory and signaling theory. These theories provide a basis for explaining the motivations behind circular economy disclosure and how such disclosure may enhance transparency, corporate legitimacy, and stakeholder relationships.
Stakeholder Theory:
According to Freeman (1984), companies are accountable not only to shareholders but also to a broader group of stakeholders, including employees, customers, regulators, investors, and the community. Based on this perspective, studies on circular economy disclosure (CED) often use stakeholder theory and signaling theory to explain the motivations for circular economy disclosure and the transparency practices of firms.
Stakeholder theory posits that businesses are not only responsible for maximizing shareholder value but also for meeting the expectations of various stakeholders, including investors, customers, employees, regulators, and the wider community. In the context of growing environmental concerns and sustainable development, stakeholders are increasingly demanding more non-financial information from businesses, particularly circular economy disclosure. Therefore, circular economy disclosure becomes a crucial tool for businesses to reduce information asymmetry, enhance transparency, and strengthen stakeholder trust.
From a corporate governance perspective, stakeholder theory emphasizes the role of the Board of Directors and the Audit Committee in ensuring accountability and overseeing information disclosure (Frias-Aceituno et al., 2013; Raimo et al., 2021; Esposito et al., 2023). An appropriately sized Board of Directors with a high proportion of independent members and frequent meetings may have stronger oversight capacity, thereby encouraging the company to disclose information more comprehensively and transparently. Similarly, an Audit Committee with a high degree of independence and frequent meetings may improve the quality of disclosed information by strengthening oversight of the reporting process. Furthermore, characteristics such as firm size and profitability also expose the company to greater stakeholder pressure while also providing sufficient resources to implement circular economy-related activities and enhance information disclosure.
Signaling Theory
Signaling theory, originally developed by Spence (1973) in the context of information asymmetry, provides an additional perspective to explain corporate disclosure behavior. The theory suggests that parties possessing superior information can use observable signals to communicate their underlying quality to less-informed parties (Spence, 1973). According to this theory, businesses use information disclosure as a tool to send positive signals to the market about firm quality, management capabilities, and commitment to sustainable development. Under conditions of information asymmetry, firms with strong operational performance and a clear sustainable development orientation have a strong incentive to disclose information to differentiate themselves from other firms.
In the context of a circular economy, disclosure related to efficient resource use, waste reduction, and product innovation can serve as an important indicator of a company’s environmental management capabilities and long-term development strategy. Therefore, large and highly profitable firms with effective governance structures may provide more extensive circular economy disclosure to strengthen their image and reputation in the market. Conversely, firms with high financial leverage may limit circular economy disclosure to minimize exposure to financial risks and disclosure costs.
Furthermore, signaling theory explains the role of governance mechanisms in enhancing the reliability of disclosed information. A board of directors with a high proportion of independent members and frequent board meetings may enhance the reliability of the signals the company sends through information disclosure. Similarly, an audit committee with an independent monitoring role will contribute to ensuring that information related to the circular economy is presented fairly and objectively, thereby enhancing the value of the signal to investors and stakeholders.
Taken together, these two theories complement each other in explaining circular economy disclosure practices. Stakeholder theory emphasizes pressure and expectations from the external environment, while signaling theory focuses on the intrinsic motivations of businesses in building and communicating a positive image. The combination of the two theories provides a comprehensive analytical framework for assessing the role of corporate governance factors and financial characteristics in promoting circular economy disclosure.
Based on this theoretical foundation, the study constructs a model to test the impact of factors related to the Board of Directors, the Audit Committee, and corporate characteristics on the level of circular economy disclosure. The simultaneous application of both theories not only helps explain the hypothesized relationships but also contributes to strengthening the theoretical basis for the research hypotheses proposed in this paper.
2.3. Research Hypotheses
Grounded in stakeholder theory, signaling theory, and the existing literature, this study develops hypotheses to examine the impact of factors related to the Board of Directors, the Audit Committee, and corporate characteristics on circular economy disclosure. Specifically, the hypotheses are categorized into three groups based on board characteristics, audit committee characteristics, and firm characteristics.
2.3.1. Board of Directors Characteristics and Circular Economy Disclosure
According to stakeholder theory, the board of directors plays a central role in overseeing corporate transparency and disclosure practices. From the perspective of signaling theory, boards also contribute to promoting disclosure as a strategic signal of firms’ commitment to sustainable development (Salvioni & Almici, 2020; Vitolla et al., 2023).
Board size is expected to positively influence circular economy disclosure (CED) because larger boards provide greater diversity in expertise, experience, and perspectives, which may enhance monitoring quality and decision-making effectiveness (Frias-Aceituno et al., 2013; Vitolla et al., 2020; Raimo et al., 2021). In addition, board independence is expected to improve objectivity, reduce conflicts of interest, and enhance corporate transparency (Frias-Aceituno et al., 2013; Raimo et al., 2021). Furthermore, board meeting frequency reflects the board’s level of engagement in governance and oversight activities, including sustainability and circular economy disclosure practices (Raimo et al., 2021; Vitolla et al., 2020).
Accordingly, the study proposes the following hypotheses:
H1: Board size is positively associated with circular economy disclosure (CED).
H2: Board independence is positively associated with circular economy disclosure (CED).
H3: Board meeting frequency is positively associated with circular economy disclosure (CED).
2.3.2. Audit Committee Characteristics and Circular Economy Disclosure
The audit committee serves as an important governance mechanism supporting the board of directors in overseeing corporate reporting and disclosure practices, particularly non-financial disclosure. From the perspective of stakeholder theory, the audit committee contributes to ensuring accountability and enhancing the reliability of disclosed information. In addition, signaling theory suggests that an effective audit committee strengthens the credibility of disclosure signals communicated to stakeholders (Raimo et al., 2021).
Audit committee size is expected to influence monitoring effectiveness by providing broader expertise and oversight capacity (Raimo et al., 2021). In addition, audit committee independence enhances objectivity and strengthens the reliability of disclosed information, thereby improving disclosure quality (Raimo et al., 2021). Furthermore, audit committee meeting frequency reflects the committee’s level of engagement and monitoring effectiveness in overseeing corporate disclosure practices, particularly in the context of sustainability reporting (Raimo et al., 2021).
Accordingly, the study proposes the following hypotheses:
H4: Audit committee size is positively associated with circular economy disclosure (CED).
H5: Audit committee independence is positively associated with circular economy disclosure (CED).
H6: Audit committee meeting frequency is positively associated with circular economy disclosure (CED).
2.3.3. Firm Characteristics and Circular Economy Disclosure
According to stakeholder theory, firm characteristics influence the extent of stakeholder pressure and expectations regarding circular economy disclosure. In addition, according to signaling theory, businesses use information disclosure as a tool to convey their commitment and market capabilities.
Firm size has been shown to have a positive relationship with the level of information disclosure, as larger firms face greater pressure for transparency and have more resources to implement activities related to sustainable development (Frias-Aceituno et al., 2013; Vitolla et al., 2020; Raimo et al., 2021). Profitability is also an important factor, as highly profitable firms are often motivated to send positive signals through information disclosure (Vitolla et al., 2020; Raimo et al., 2021). Conversely, firms with high financial leverage may limit information disclosure because of financial pressure and risk (Raimo et al., 2021).
Accordingly, the study proposes the following hypotheses:
H7: Firm size is positively associated with circular economy disclosure (CED).
H8: Profitability is positively associated with circular economy disclosure (CED).
H9: Financial leverage is negatively associated with circular economy disclosure (CED).
3. Research Methodology
3.1 Research Sample
The research sample includes companies listed on the Ho Chi Minh Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX). The companies were selected based on the following criteria: (i) public availability of annual reports throughout the research period; (ii) annual reports providing sufficient information on corporate governance (including the Board of Directors and the Audit Committee), financial information, and content related to sustainability or circular economy disclosure; and (iii) exclusion of companies in the financial, banking, and insurance sectors due to their specific governance and information disclosure mechanisms.
Secondary data were collected from the companies' annual reports, which are publicly available on the companies' official websites or on the official website of HOSE and HNX.
3.2. Research model
The research model was constructed as follows:
CEDIit = β0 + β1 BDSIZEit + β2 BDINDit + β3 BDMEETit + β4 ACSIZEit + β5 ACINDit + β6 ACMEETit + β7 FSIZEit + β8 PROFit+ β9 LEVit + εit (1)
Table 1. Measuring variables in the model
Variable encoding | Variable name | Measurement | Reference |
|---|---|---|---|
Dependent variable | |||
CEDI |
| The number of disclosed CED items divided by the total number of applicable disclosure items (39), resulting in an index ranging from 0 to 1 |
|
Independent variable | |||
BDSIZE | Size of the board of directors | Number of members on the board of directors | Frias-Aceituno et al. (2013); Raimo et al. (2021); Vitolla et al. (2020) |
BDIND | Independence of the Board of Directors | The proportion of non-executive members on the board of directors | Frias-Aceituno et al (2013); Raimo et al. (2021); Vitolla et al. (2020) |
BDMEET | Frequency of Board of Directors meetings | Number of annual board meetings | Raimo et al. (2021); Vitolla et al. (2020) |
ACSIZE | Size of the Audit Committee | Number of members on the audit committee | Raimo et al. (2021) |
ACIND | Independence of the Audit Committee | The proportion of independent members on the audit committee. | Raimo et al. (2021) |
ACMEET | Frequency of Audit Committee meetings | Number of annual audit committee meetings | Raimo et al (2021) |
FSIZE | Company Size | Natural logarithm of total assets | Frias-Aceituno et al. (2013); Raimo et al. (2021); Vitolla et al. (2020) |
PROF | Profit | Return on Equity (ROE) | Raimo et al (2021); Vitolla et al. (2020) |
LEV | Financial leverage | The ratio of total assets to equity. | Raimo et al. (2021); Vitolla et al. (2020) |
3.3. Measurement of Variables
The data used in this study were collected from firms listed on the Vietnamese stock exchanges. The sample consists of 150 firms listed on the Ho Chi Minh Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX). Data were collected from firms’ official websites, including annual reports and financial statements covering the period from 2020 to 2024.
The dependent variable in this study is the Circular Economy Disclosure Index (CEDI), measured using content analysis and a coding framework developed from previous studies. Content analysis is used as a quantitative technique to systematically evaluate the information disclosed in firms' annual reports.
This study applies a manual coding method to enhance accuracy in identifying and interpreting circular economy disclosure content.
The CEDI consists of 39 indicators covering key dimensions of the circular economy, including resource use, energy, water, biodiversity, emissions, waste, policies and investment, measurement systems, and related certifications and standards.
Each indicator is scored using an unweighted scoring method, whereby a company is assigned a value of “1” if it discloses the corresponding information and “0” otherwise. The total disclosure score is standardized by dividing the number of disclosed items by the maximum number of applicable indicators, yielding the CED index ranging from 0 to 1, reflecting the level of circular economy disclosure. A higher index indicates a greater level of disclosure.
The Circular Economy Disclosure Index was developed using the content analysis method with reference to previous studies, including Esposito et al. (2023) and Phan et al. (2024), and was adapted to the Vietnamese context. The index is presented as follows:
Table 2. Circular Economy Disclosure Index Dimensions and Number of Disclosure Items
Information Dimension | Number of Disclosure Items |
|---|---|
1. Materials & Resource Use | 6 |
2. Energy | 5 |
3. Water & Effluents | 3 |
4. Biodiversity | 2 |
5. Emissions | 6 |
6. Waste & E-waste | 3 |
7. Policies & Investments | 4 |
8. Indicators & Measurement Systems | 5 |
9. Certifications & Standards | 5 |
Total | 39 |
The study employs an unweighted disclosure index (Raimo et al., 2021), in which each item is scored 1 if disclosed and 0 otherwise. The total score ranges from 0 to 39, with higher values indicating a higher level of circular economy disclosure. The total disclosure score is then standardized by dividing the number of disclosed items by the maximum number of applicable disclosure items (39). Accordingly, the CEDI ranges from 0 to 1.
The index is calculated as follows:
CEDIj
Where:
- CEDIj: Circular Economy Disclosure Index of company j, and 0 ≤ CEDIj ≤ 1
- dij= 1 if circular economy disclosure item 
is disclosed by company 
, and 
otherwise.
− nj: The total number of circular economy disclosure items applicable to company 
(
in this study).
4. Empirical Results and Discussion
Table 3 reports the descriptive statistics of the dependent variable (circular economy disclosure – CEDI) and the explanatory variables included in the research model, based on 750 firm-year observations.
Table 3. Descriptive statistics of research variables
Variable | Observation | Mean | Standard Deviation | Min | Max |
CEDI | 750 | 0.399 | 0.053 | 0.210 | 0.560 |
BDSIZE | 750 | 5.603 | 1.266 | 3.000 | 11.000 |
BDIND | 750 | 0.703 | 0.173 | 0.200 | 1.000 |
BDMEET | 750 | 13.012 | 12.079 | 2.000 | 129.000 |
ACSIZE | 750 | 3.003 | 0.414 | 1.000 | 6.000 |
ACIND | 750 | 0.295 | 0.133 | 0.000 | 1.000 |
ACMEET | 750 | 5.724 | 7.066 | 1.000 | 77.000 |
FSIZE | 750 | 28.334 | 1.201 | 26.419 | 33.985 |
PROF | 750 | 0.057 | 0.064 | -0.322 | 0.320 |
LEV | 750 | 1.715 | 1.958 | 0.032 | 22.830 |
Table 4 reports descriptive statistics of the variables used in the study, based on 750 firm-year observations collected from 150 listed firms during the period 2020 – 2024. The dependent variable, circular economy disclosure (CEDI), has a mean value of 0.399, a standard deviation of 0.053, and values ranging from 0.210 to 0.560. These results indicate moderate variation in disclosure levels among firms. Overall, circular economy disclosure practices appear to be relatively consistent across the sample.
Regarding board characteristics, board size (BDSIZE) averages 5.603 members, ranging from 3 to 11 members, which is consistent with the governance practices of listed companies in Vietnam. Board independence (BDIND) averages 0.703, meaning that approximately 70% of board members are independent. The average number of board meetings (BDMEET) is 13.012 meetings per year, with a relatively large standard deviation (12.079) and a maximum of 129 meetings, reflecting substantial differences in governance practices among firms.
With respect to audit committee characteristics, audit committee size (ACSIZE) averages 3.003 members, ranging from 1 to 6, indicating that most firms maintain relatively small audit committees. The proportion of independent audit committee members (ACIND) averages 0.295, or approximately 30%, which is lower than board independence. The average number of meetings (ACMEET) is 5.724 per year, ranging from 1 to 77. This variation indicates substantial differences in audit committee activity across firms.
Regarding firm characteristics, firm size (FSIZE), calculated as the natural logarithm of total assets, has an average value of 28.334 and ranges from 26.419 to 33.985. This indicates substantial differences between large and small firms. Profitability (PROF) has an average value of 0.057 (approximately 5.7%), with a standard deviation of 0.064; however, the minimum value of -0.322 indicates that some firms recorded negative profitability. Financial leverage (LEV) averages 1.715, with a maximum of 22.830, indicating substantial differences in capital structure across firms.
Pearson correlation analysis was conducted to examine the relationships between variables and assess potential multicollinearity, which could affect the reliability of regression estimates. The correlation matrix showed that CEDI was positively correlated with board independence (BDIND) (r = 0.402, p < 0.01). Firms with a higher proportion of independent directors tended to disclose more circular economy information. This finding is consistent with the proposed hypothesis.
Furthermore, CEDI showed a relatively strong positive correlation with profitability (PROF) (r = 0.350, p < 0.01). Firms with higher profitability tended to disclose more circular economy information. Conversely, CEDI showed a relatively strong negative correlation with financial leverage (LEV) (r = −0.653, p < 0.01). Firms with higher leverage tended to have lower levels of circular economy disclosure. This represents the strongest correlation among the study variables.
The remaining variables, namely board size (BDSIZE), board meeting frequency (BDMEET), audit committee size (ACSIZE), audit committee independence (ACIND), audit committee meeting frequency (ACMEET), and firm size (FSIZE), were positively correlated with circular economy disclosure (CEDI), although the correlations were relatively weak.
These relationships were weaker than those observed for BDIND, PROF, and LEV. Overall, all pairwise correlation coefficients among the independent variables were below the generally accepted threshold of 0.80 (Gujarati & Porter, 2009). Therefore, multicollinearity is unlikely to be a serious concern in the regression analysis.
Table 4. Correlation coefficient matrix
| CEDI | BDSIZE | BDIND | BDMEET | ACSIZE | ACIND | ACMEET | FSIZE | PROF | LEV | VIF |
CEDI | 1.000 |
| |||||||||
BDSIZE | 0.193 | 1.000 | 1.26 | ||||||||
BDIND | 0.402 | 0.102 | 1.000 | 1.80 | |||||||
BDMEET | 0.125 | -0.095 | 0.005 | 1.000 | 1.23 | ||||||
ACSIZE | 0.094 | 0.229 | 0.034 | -0.091 | 1.000 | 1.70 | |||||
ACIND | 0.284 | 0.020 | 0.582 | 0.001 | -0.397 | 1.000 | 2.10 | ||||
ACMEET | 0.084 | -0.001 | 0.031 | 0.378 | -0.027 | 0.028 | 1.000 | 1.18 | |||
FSIZE | 0.163 | 0.356 | 0.156 | 0.095 | 0.005 | 0.077 | 0.061 | 1.000 | 1.20 | ||
PROF | 0.350 | 0.068 | -0.059 | -0.193 | 0.068 | 0.004 | -0.132 | 0.007 | 1.000 | 1.28 | |
LEV | -0.653 | -0.114 | -0.131 | 0.128 | 0.014 | -0.147 | 0.122 | -0.015 | -0.418 | 1.000 | 1.28 |
Average value of VIF |
|
|
|
|
|
| 1.42 | ||||
Table 5. Model Selection and Diagnostic Tests
Test | Test statistic | p-value | Conclusion |
| Hausman test | χ²(9) = 32.91 | < 0.001 | FEM is preferred to REM |
| Modified Wald test for groupwise heteroskedasticity | χ²(150) = 2555.71 | < 0.001 | Heteroskedasticity is present |
| Wooldridge test for autocorrelation | F(1,149) = 10.852 | 0.0012 | First-order autocorrelation is present |
The Hausman test shows that FEM is more appropriate than REM (χ²(9) = 32.91, p < 0.001). The Modified Wald test indicates the presence of groupwise heteroskedasticity (χ² (150) = 2555.71, p < 0.001). In addition, the Wooldridge test indicates first-order autocorrelation (F(1,149) = 10.852, p = 0.0012). Therefore, FGLS is used to address heteroskedasticity and autocorrelation.
Table 5. Regression Results Across Different Models
| Variable | Pooled OLS | FEM | REM | FGLS |
| BDSIZE | 0.0025** | 0.0027 | 0.0026** | 0.0023** |
| BDIND | 0.0815*** | 0.0881*** | 0.0828*** | 0.0779*** |
| BDMEET | 0.0010*** | 0.0011*** | 0.0010*** | 0.0009*** |
| ACSIZE | 0.0156*** | 0.0087* | 0.0146*** | 0.0165*** |
| ACIND | 0.0338*** | 0.0151 | 0.0310** | 0.0370*** |
| ACMEET | 0.0009*** | 0.0010* | 0.0008*** | 0.0008*** |
| FSIZE | 0.0026** | −0.0229*** | 0.0023* | 0.0032*** |
| PROF | 0.1374*** | 0.1134*** | 0.1364*** | 0.1362*** |
| LEV | −0.0172*** | −0.0100*** | −0.0170*** | −0.0174*** |
| Observations | 750 | 750 | 750 | 750 |
| R² | 0.6264 | Within = 0.2462 | Overall = 0.6264 | — |
| F-statistic/Wald χ² | F(9,740) = 137.89 | F(9,591) = 21.45 | Wald χ²(9) = 1015.88 | Wald χ²(9) = 1427.25 |
| Model p-value | < 0.001 | < 0.001 | < 0.001 | < 0.001 |
The model comparison results in Table 4.4 show that the signs and significance levels of the estimated coefficients are generally consistent across the estimation methods, particularly across the FEM, REM, and FGLS estimates, thereby supporting the robustness of the findings. Specifically, corporate governance variables such as board size (BDSIZE), board independence (BDIND), and board meeting frequency (BDMEET) maintain positive and statistically significant effects in most models, with the FGLS estimates being stable across specifications.
The model statistics in Table 4.4 show that all estimated models are statistically significant. The Pooled OLS model has an R² of 0.6264 and an adjusted R² of 0.6219, with F(9, 740) = 137.89 (p < 0.001). The FEM has a within R² of 0.2462 and F(9, 591) = 21.45 (p < 0.001). The REM has an overall R² of 0.6264 and Wald χ²(9) = 1015.88 (p < 0.001). The FGLS model is also statistically significant, with Wald χ²(9) = 1427.25 (p < 0.001). All models use 750 firm-year observations.
The FGLS estimation results show that both corporate governance variables and firm characteristics are significantly associated with circular economy disclosure. Governance-related variables, including board and audit committee characteristics, are positively associated with circular economy disclosure, whereas financial leverage is negatively associated with circular economy disclosure.
Specifically, board size, board independence, and board meeting frequency all have a positive effect on circular economy disclosure. These findings are consistent with stakeholder theory, which suggests that an effective board responds to stakeholders’ expectations. These findings also support signaling theory, according to which strong governance characteristics signal governance quality and corporate transparency (Frias-Aceituno et al., 2013; Vitolla et al., 2020; Raimo et al., 2021). The results are also consistent with previous studies on corporate governance and non-financial disclosure. In particular, Esposito et al. (2023) found that corporate governance mechanisms are associated with circular economy disclosure.
Similarly, audit committee characteristics, including size, independence, and meeting frequency, are positively associated with circular economy disclosure. The positive association suggests that audit committees play an important role in strengthening transparency and reducing information asymmetry. This finding is also in line with stakeholder and signaling theories, indicating that effective internal governance mechanisms encourage greater non-financial disclosure, consistent with previous studies on corporate governance and sustainability disclosure. This result is consistent with Raimo et al. (2021), who found that audit committee characteristics are associated with the quality of integrated reporting. Although Raimo et al. (2021) focused on integrated reporting, the results of this study show that audit committee characteristics are also associated with circular economy disclosure.
Regarding firm characteristics, firm size and profitability have positive effects on circular economy disclosure. Larger and more profitable firms are more likely to disclose circular economy information, reflecting their stronger commitment to transparency and sustainable business practices. This finding is consistent with signaling theory, which views corporate disclosure as a means of communicating financial strength and sustainability commitment to stakeholders. The positive association between firm size and CED is consistent with Vitolla et al. (2023), who also found a positive relationship between firm size and circular economy disclosure. In addition, profitability is positively associated with CED, suggesting that profitable firms may have more resources to implement and disclose circular economy-related activities.
By contrast, financial leverage has a negative effect on circular economy disclosure. Firms with higher leverage are less likely to disclose sustainability-related information, possibly because such disclosure may draw greater attention to financial risks and send unfavorable signals to the market. This result differs from Vitolla et al. (2023), who found a positive relationship between financial leverage and circular economy disclosure. In this study, financial leverage is negatively associated with CED. This difference may be related to the Vietnamese context, where firms with higher financial leverage may face greater financial pressure and have fewer resources for circular economy activities and related disclosure.
Overall, the findings indicate that circular economy disclosure is jointly influenced by both corporate governance quality and firm financial characteristics. Corporate governance mechanisms play an important role in improving transparency and encouraging sustainability-related disclosure in the context of sustainable development. In Vietnam, Phan et al. (2024) examined environmental and circular economy disclosure among Vietnamese listed companies and found that government ownership and Big Four audit services are positively associated with disclosure. This study provides additional evidence by examining 150 listed firms during 2020–2024 and considering Board of Directors characteristics, Audit Committee characteristics, and firm-specific financial characteristics in the same model.
5. Conclusion and Implications
5.1. Conclusion
This study examines the factors influencing circular economy disclosure (CED) among Vietnamese listed firms, focusing on corporate governance mechanisms and firm characteristics. The study uses panel data from 150 non-financial firms listed on the HOSE and HNX during the period 2020–2024, comprising 750 firm-year observations. CED is measured using an index consisting of 39 disclosure items. The independent variables include characteristics of the Board of Directors, the Audit Committee, and firm financial characteristics. Pooled OLS, Fixed Effects Model (FEM), Random Effects Model (REM), and Feasible Generalized Least Squares (FGLS) are used for data analysis. Based on the diagnostic test results, FGLS is used as the final estimation method to address heteroskedasticity and autocorrelation.
The empirical results show that corporate governance mechanisms and firm characteristics are significantly associated with circular economy disclosure among Vietnamese listed firms. Specifically, board and audit committee characteristics, including size, independence, and meeting frequency, are positively associated with circular economy disclosure, whereas financial leverage is negatively associated with circular economy disclosure. Firm size and profitability are also positively associated with circular economy disclosure.
These findings support the role of corporate governance mechanisms and firm financial characteristics in improving corporate transparency and disclosure practices. They are also consistent with stakeholder theory and signaling theory, particularly in emerging markets such as Vietnam.
Overall, the findings show that corporate governance mechanisms and firm financial characteristics are important factors associated with CED. These findings provide additional empirical evidence on CED and its determinants in the context of Vietnamese listed firms.
5.2. Implications
The findings suggest that strengthening corporate governance mechanisms contributes to greater circular economy disclosure. Firms should improve the effectiveness of their boards of directors and audit committees by strengthening the independence of these governance bodies, maintaining appropriate governance structures, and increasing meeting frequency to enhance transparency and reduce information asymmetry.
In addition, firms should leverage their size and financial strength to invest in sustainability reporting systems and disclosure practices. At the same time, maintaining an appropriate level of financial leverage may help alleviate potential constraints on circular economy disclosure.
From a regulatory perspective, policymakers and regulatory authorities should strengthen the legal framework and disclosure mechanisms related to circular economy practices. Policymakers should also pay greater attention to firms with high financial leverage to enhance transparency and support broader sustainable development objectives.
Despite these implications, this study is limited by the scope of factors examined, as it focuses primarily on corporate governance mechanisms and selected firm characteristics. Future research could extend the current model by incorporating additional organizational and institutional factors to provide a more comprehensive understanding of the determinants of circular economy disclosure.