ESG Disclosure in an Emerging Market: An Empirical Analysis of the Influence of Board Characteristics and Ownership Structure

Jaime F Lavin,Alejandro A Montecinos-Pearce

doi:10.3390/su131910498

Abstract

In the context of greater demand for corporate transparency, there is a growing pressure on boards to produce and communicate information to their investors and stakeholders. The current literature on integrated reporting shows that the provision of ESG information is a crucial factor that improves corporate governance by reducing agency problems. This issue is also critical in emerging economies, and particularly among Latin American firms. The concentration, opacity, and lack of evidence about ESG disclosure in less developed financial markets provide a promising environment to study the implications of board heterogeneity and ownership structure on strategic corporate decisions such as the disclosure of ESG indicators in developing economies. Using Tobit panel data models, we study how these factors affect the extent of ESG disclosure by Chilean listed firms. Our main results suggest that a board’s independence and gender diversity positively influence the extent of disclosure of ESG indicators. Our evidence helps firms concerned with strengthening their board’s features, investors that require screening firms’ ESG risk factors, and supports regulators’ decisions on setting norms regarding the extent of disclosure of ESG information by firms.

Highlights

In recent decades, the world has changed
As indicated in the previous sections, first we econometrically study whether the variables related to ownership, independence, diversity, and audit independently considered influence or not the extent of ESG disclosure (ESGD) of our sample of firms
Our results suggest that greater presence of non-executive directors jointly with a major number of women on boards goes on the previous path by expanding the extent of business visions considered in the business decision-making, contributing in this way, to improving the ESG disclosure, and potentially associated with better corporate results [65], better corporate governance practices [66], and better ESG risk management by firms [67]

Summary

Introduction

As many privately owned firms produce revenues greater than the GDP of many countries [1], the rise in the access of the general public and institutional investors to information about the environmental and social consequences of a firm’s decisions as well as the availability of information about a firm’s governance has spurred stakeholders’ relevance in management decisions. The scrutiny of the stakeholders is not just over what firms produce, and on how they do it. In this context, the value created by the firm has gone beyond the impact of the bottom line. The widening influence, the scope, the impact, and the visibility of the operation of listed firms, beyond the mere generation of profits, uncover a new margin of risks exposure [2,3]

Methods

Results

Discussion

Conclusion