Environmental, Social, and Governance Committees and Information Technology Outcomes

Abstract

ABSTRACT With the recent increase in demand for environmental, social, and governance (ESG) reporting, more companies are creating board-level ESG committees to oversee progress in these areas. Companies are also becoming more aware of the important role that information technology (IT) can play in achieving ESG reporting goals. I argue that an improvement in ESG factors goes hand in hand with an improvement in IT. Specifically, I predict that companies with ESG committees will also benefit through an improvement in IT outcomes. Using a sample of companies from 2004 to 2022 I investigate two direct and two indirect IT outcomes. I find that environmentally and socially focused committees are negatively associated with both IT-related material weaknesses in internal controls and cybersecurity breaches. Further, companies with governance committees report fewer breaches and issue more accurate earnings forecasts. Conversely, I find that firms with environmental and social committees take longer to announce earnings. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G30; M40; O32.