Exploring the ESG–audit fees nexus: insights from Indian firms

Manuscript type: Research paper Research aims: The study aims to investigate the extent and level of environmental, social and governance (ESG) performance of listed companies in Thailand, and test for the relationship between ESG committees and performance. Design/methodology/approach: Using the top 100 Thai listed companies (364 firm-year observations) from the Stock Exchange of Thailand (SET), the corporate annual reports during 2018 to 2021 are used to collect ESG board committee characteristics, while ESG performance is collected and measured by ESG scores from S&P Capital IQ and Capital IQ Pro databases. Descriptive analysis, correlation matrix, and multiple regression are used to analyse the data. Research findings: The average performance score of ESG in Thailand is 29.52. In addition, there was an increase of ESG performance by the top 100 firms in Thailand during the period under study. There is a significantly positive relationship between independent ESG committees and ESG performance, while dual positions between top management and ESG committees is negatively correlated with ESG performance. Theoretical contribution/originality: The findings of the relationship between ESG committees and performance demonstrates that agency theory can be used to explain the factors influencing ESG performance by Thai listed companies.

Non-technical summary The research paper studies business sophistication, tax revenue policies, and ESG (Environmental, Social, and Governance) performance across 105 Belt and Road Initiative (BRI) countries spanning from 2013 to 2021. Key insights from the study underscore a positive association between business sophistication and ESG performance. This suggests that organizations leveraging advanced knowledge and innovation are better positioned to implement effective ESG strategies. Moreover, higher tax revenue is linked to better ESG, underlining a commitment to sustainability within the business landscape. Notably, Information, Communication, and Technology (ICT) emerges as a pivotal catalyst in augmenting ESG performance, particularly when integrated with business sophistication and tax revenue mechanisms. Technical summary This study examines the relationship between business sophistication, tax revenue policies, and ESG (Environmental, Social, and Governance) performance in 105 Belt and Road Initiative (BRI) countries from 2013 to 2021, focusing on the moderating role of Information, Communication, and Technology (ICT). Using advanced econometric methods like Two-Stage Least Squares (2SLS), two-step Generalized Method of Moments (GMM), and fixed-effect regression, the research also considers factors such as microfinance institutions, commercial bank financing, and the COVID-19 pandemic. The findings reveal a significant positive link between business sophistication and ESG performance, indicating that companies with advanced knowledge and innovation are more likely to implement successful ESG policies. Higher tax revenue is also positively correlated with ESG improvements, reflecting support for sustainability. ICT is crucial in enhancing ESG performance, especially when combined with business sophistication and tax revenue. Microfinance and commercial banking are vital in promoting ESG practices in BRI countries. Despite a temporary decline in ESG performance due to COVID-19, the study predicts a post-pandemic resurgence, emphasizing the need to foster an innovation culture for sustainable development. Social media summary There is a positive association between business sophistication, tax revenues, microfinance, ICT, and commercial banking, which are key drivers of better ESG performance in BRI countries.

Purpose This paper aims to empirically assess the effect of hospitality firms’ digital dynamic capabilities (DDC) on their corporate digital responsibilities (CDR) and the subsequent impact on their environmental, social and governance (ESG) performance. Specifically, it examines how CDR practices shape ESG digitization and performance in the hospitality industry. Design/methodology/approach The authors collect cross-sectional data via the online survey platform, gathering responses from 257 hotel firms across 42 countries and estimate the structural paths using partial least-squares (PLS) structural equation model. To reduce unobserved heterogeneity for robustness, the authors additionally implement finite mixture PLS (FIMIX-PLS), supported by a post hoc power analysis conducted through G*Power. Findings The results indicate that the three elements of DDC – digital sensing, digital seizing and digital reconfiguring – positively affect substantive and symbolic CDR of hospitality firms. Both CDRs simultaneously contribute positively to firms’ ESG digitization, whereas their direct effect on ESG performance is found to be insignificant. Given the positive impact of ESG digitization on ESG performance, this indicates that ESG digitization acts as a mediator, bridging the impact of both CDRs on ESG performance. Thus, DDC elements enhance CDRs, which, in turn, influence ESG performance indirectly through ESG digitization. Research limitations/implications The empirical support for the interconnected relationship between DDC, CDR and ESG performance provides hospitality and tourism managers with the latest understanding of the mechanism by which they can enhance sustainability performance. Originality/value This study addresses a significant gap in the prior literature by investigating how substantive and symbolic CDR practices differently impact ESG outcomes in the hospitality industry. From a dynamic capability perspective, the study integrates the concept of DDC with ESG and highlights their role in enhancing the effectiveness of CDR practices.

Purpose This study aims to examine whether the chairman's status as a former chief executive officer (ex-CEO) moderates the relationship between environmental, social and governance (ESG) performance and audit fees in UK companies. It explores how leadership legacy shapes the extent to which ESG engagement is reflected in audit pricing. Design/methodology/approach Using a panel dataset of the Financial Times Stock Exchange (FTSE) 350 firms from 2017 to 2024, the study investigates the ESG–audit fee nexus. Audit fees serve as a proxy for audit effort and perceived audit risk, while ESG performance is measured using overall and pillar scores. A moderation model assesses the effect of the chairman's ex-CEO status. Findings Results show a positive correlation between ESG performance and audit fees, indicating that greater ESG involvement increases reporting complexity and audit scrutiny. However, when the chairman is a former CEO, this relationship weakens, suggesting that leadership legacy influences auditors' risk assessments. Leadership continuity, such as the presence of an ex-CEO chairman, may reduce how auditors evaluate risk. Research limitations/implications The study focuses on FTSE 350 firms between 2017 and 2024. Future research could extend the analysis to multi-country settings and alternative audit quality measures. Practical implications For boards, the findings raise questions about balancing continuity and independence during leadership succession. For auditors and regulators, the results highlight how governance structures influence audit pricing and the credibility of ESG reporting. Originality/value This study links ESG performance, leadership legacy and audit pricing, showing that ex-CEO chairmanship weakens the ESG–audit fee relationship.

<p><b>This thesis investigates the relationship between cross-country mandatory environmental, social and governance (ESG) regulations and firm-level outcomes, such as ESG performance, corporate finance, and investment, for both developing and developed countries. ESG performance is initially examined to determine whether mandatory ESG regulations affect it and to what extent. Second, the study investigates the impact of mandatory ESG on corporate finance and investment. Lastly, the study explores whether mandatory ESG regulations affect firm-level outcomes based on countries' governance and economic systems, and industries. The study uses a large sample of 69,010 firm-years across 73 countries, over the period 2005 – 2020 to address the foregoing issues.</b></p> <p>In addressing the impact of mandatory ESG regulations on ESG performance, the study employs a difference-in-differences (DiD) design. The DiD technique can isolate the effect of regulatory shocks to firm-level outcomes. According to the DiD analysis conducted, cross-country mandatory ESG improves firm-level ESG performance in developed countries, but not in developing countries. The study also concludes that mandatory ESG regulations have a positive impact only on ESG components in developed countries and have a more dominant impact on environmental (E) component. The findings are robust to a range of checks and test cases, including a triple DiD design set-up and propensity score-matched sample.</p> <p>The study employs an investment Euler equation framework and generalised method of moments (GMM) estimators to explore how mandatory ESG impacts corporate finance and investment. Euler frameworks account for the dynamic nature of investment, whereas GMMs account for endogenous dynamics in dynamic models. The study demonstrates that mandatory ESG increases corporate investment by increasing firms' access to external funds. The findings are robust to a battery of tests, including a triple DiD design set-up, propensity score-matched sample and the parallel trends assumption.</p> <p>Using an investment Euler equation framework and the GMM estimators, the study explores whether the impact of mandatory ESG on corporate finance and investment is dependent on a country's governance and economic system. When mandatory ESG is affected by country factors such as governance systems and economic well-being, the effect of mandatory ESG on investment via internal finance channel persists, according to the study. However, while consistent results are found in developed countries, inconsistent results are found in developing countries. According to the study, oil, gas, and mining firms are likely to respond effectively to mandatory ESG regulations because of increased scrutiny and pressure.</p> <p>Overall, the findings from the study imply that cross-country mandatory ESG has had a positive impact on corporate ESG performance, finance, and investment. For firms located in developed countries, these findings hold consistently, while for those located in developing countries, the opposite holds true. Also, the study reveals that firms in the oil, gas, and mining industries effectively respond to regulatory requirements. As a result, this study provides policy makers and accountants with an understanding of how mandatory ESG impacts firm ESG activities and performance, which is crucial for regulatory reforms.</p>

PurposeThis study aimed to investigate the role of the country's institutional quality on the environmental, social and governance (ESG) performance of its companies.Design/methodology/approachOver a four-year period (2016–2019), the study examined the ESG performance of 412 organizations situated in 19 countries. ESG performance was the dependent variable, and the independent variables were rule of law, economic freedom, education index and international trade freedom. These factors described the institutional quality of countries in the authors’ study.FindingsThe findings reveal that institutional quality has a major impact on ESG performance. Companies engage in more ESG practices when they operate in countries with greater economic freedom and international trade freedom. The authors corroborated the core assumption of institutional theory (IT), which argues that organizational behavior is determined by the country's institutional setting.Research limitations/implicationsThe findings, like all research, should be interpreted with caution. The authors’ research focused solely on large energy corporations. As a result, the conclusions cannot be applied to small companies or other industries. ESG performance can also be measured using different datasets.Practical implicationsIf managers want their companies to perform better in terms of ESG, the authors recommend that they form a CSR committee and sign the Global Compact. This study may be valuable to international policymakers because they can underline that greater economic freedom, better education and greater international trade freedom all promote higher ESG performance.Originality/valueTo the best of the authors' knowledge, nearly all of research explores the relationship between ESG and financial performance. As a result, this study built on past research by investigating how national aspects affect corporate ESG performance.

[Purpose] This study analyzes the impact of ESG (Environmental, Social, and Governance) performance on the audit efficiency. Rather than separately examining the input factors (audit hours and audit fees) and output factors (audit quality) related to auditing, we empirically analyze how ESG activities, which are becoming increasingly important for the long－term survival and social responsibility of companies, affect the efficiency of external audits by simultaneously considering both the input and output factors needed to achieve the same level of audit quality. [Methodology] Using Data Envelopment Analysis (DEA), we measure audit efficiency and evaluate individual firms’ overall ESG performance as well as their respective E (Environmental), S (Social), and G (Governance) performance using the ratings provided by the Korean ESG Standards Institute. By focusing on companies listed on KOSPI and KOSDAQ markets, we analyze the relationship between ESG performance and audit efficiency through multiple regression analysis and entropy balancing techniques. [Findings] The results indicate that higher ESG performance tends to lead to lower audit efficiency. This phenomenon is interpreted as the complexity of corporate structures increasing due to ESG－related activities, which in turn requires external auditors to exert greater audit effort. However, in the case of industry－specialized auditors, this reduced efficiency was found to be statistically significantly mitigated, suggesting that auditors with higher industry expertise contribute to more effective auditing. [Implications] This study examines the impact of ESG information on auditors' audit procedures in a context where the need for ESG information assurance is emerging. It suggests that external auditors need to consider the influence of ESG on corporate risk not only to achieve audit quality but also to enhance audit efficiency.

PurposeThis paper aims to investigate the impact of environmental, social and governance (ESG) performance on the firm performance of select Indian companies.Design/methodology/approachThe present paper is a cross-section study based on secondary data with a sample of 222 Indian firms. The ESG performance for Indian companies is based on the Credit Rating Information Services of India Limited (CRISIL) ESG score, and the financial data are extracted from the ACE Equity database. Both accounting- and market-based measures of firm performance are used. Ordinary least squares and simultaneous quantile regression models are used for empirical investigation.FindingsThe study reveals that Indian firms focus much more on governance and social parameters than environmental ones. The results indicate that ESG performance and its components are positively associated with firm performance. The results of quantile regression show that the impact of ESG is different at different locations of the conditional distribution of firm performance and the positive impact is more pronounced at upper quantiles.Originality/valueTo the best of the authors’ knowledge, this is the first study in India based on the CRISIL ESG score for analyzing the ESG and firm performance relationship. Furthermore, in the Indian context, a modest attempt is made to study the influence of ESG performance at different locations of the distribution of firm performance by using quantile regression.

The challenge of Environmental, Social and Governance (ESG) has been identified as being inextricably linked to organisational culture, with these aspects being embedded within the company’s values and practices. The companies’ commitment in promoting sustainability, diversity and ethics in their activity is considered to be a prerequisite for effective performance in relation to all categories of stakeholders. The increased interest in the relationship between ESG and financial performance has led to a substantial volume of research. This paper’s objectives are to broaden the discussions of the relationship between ESG and financial performance, through a bibliometric analysis of 1461 articles. The following themes were identified as the primary subjects of research: corporate disclosure of ESG information and financial performance; ESG, volatility, risk and return; corporate ESG performance and dividend payment; the financial performance indicators in association with ESG performance; ESG, development, innovation, digitisation; ESG performance and earnings management; and ESG controversies and business performance. The trends in the research of the topic concerned the particularities of the relationship between the variables in times of crisis, the correlation between the variables moderated by reporting, the analysis of different ESG ratings, green financing, the particularities in the banking system, materiality and sectoral particularities, as well as ESG disclosure and corporate financial flexibility. The results of the study enhance understanding of this relationship, being useful to both stakeholders and scholars, identifying trends and tendencies in this issue, and providing directions for future studies to establish the determining factors and performance practices.

Over the past decades, the frequency and economic losses from natural disasters have continued to escalate globally. Disasters pose significant challenges to global sustainable economic and social development. As a critical part of the economy, a firm’s ESG performance is a key indicator of sustainability. Whereas the determinants of firms’ ESG (environmental, social, and governance) performance have gained growing attention, limited research focuses on the impact of natural disasters on ESG performance. This paper provides the first empirical study on the short-, medium-, and long-term impacts of natural disasters on firms’ ESG performance through the lensof earthquakes. By exploiting a difference-in-differences approach based on panel data of Chinese listed firms and a dataset of seismic events, this paper shows that earthquakes have a significant positive impact on affected firms’ ESG performance, with short-term positive effects on environmental and social performance and long-term positive effects on social and governance performance. Heterogeneity analysis reveals that the positive effects are more pronounced for state-owned firms, relatively smaller firms, and firms located in cities with frequent earthquake occurrences. This study highlights the distinct temporal effects on different ESG dimensions and provides new insights for policymakers to employ ESG practices to alleviate the negative effects of disasters.

This research is motivated by corporate sustainability, where environmental, social and corporate governance issues are important in the company's annual report in addition to financial statements. The purpose of this study is to examine the relationship between ESG (Environmental, Social, and Governance) performance on Stock Return based on changes in stock prices at the beginning of the year and the end of the year on the Indonesia Stock Exchange (IDX). This study uses data on companies listed on the SRI-KEHATI Index. Of the 25 companies listed on the Indonesia Stock Exchange, 17 sample data were used, namely company data for the 2019-2023 period. Environmental, Social, and Governance performance is assessed through the ESG score by the Morningstar Sustainalytics assessment agency obtained from Refinitiv Eikon. The analysis technique uses panel data regression analysis random effect model (REM) with ESG score as the independent variable and Stock Return as the dependent variable assisted by using the Eviews 13 application. Partial test results (t-test) show that there is no relationship between ESG performance and Stock Returns of companies that join the SRI-KEHATI index. The results of the F test simultaneously show that there is a significant relationship between ESG performance on the stock returns of companies incorporated in the SRI-KEHATI index. Keywords: ESG; Sri Kehati; stock return. Penelitian ini dilatarbelakangi oleh keberlanjutan perusahaan, dimana isu lingkungan, sosial dan tata kelola perusahaan menjadi penting dalam laporan tahunan perusahaan selain laporan keuangan. Tujuan dari penelitian ini adalah menguji hubungan antara kinerja ESG (Environmental, Social, and Governance) terhadap return saham berdasarkan perubahan harga saham pembukaan awal tahun dengan penutupan akhir tahun pada Bursa Efek Indonesia (BEI). Penelitian ini menggunakan data perusahaan yang terdaftar pada Indeks SRI-KEHATI. Dari 25 peusahaan yang terdaftar di Bursa Efek Indonesia, sebanyak 17 data sampel yang digunakan yakni periode tahun 2019-2023. Kinerja Environmental, Social, dan Governance dinilai melalui ESG score oleh lembaga penilai Morningstar Sustainalytics diperoleh dari Refinitiv Eikon. Teknik analisis menggunakan analisis regresi data panel random effect model (REM) dengan ESG score sebagai variabel independen dan return saham sebagai variabel dependen yang dibantu dengan menggunakan aplikasi Eviews 13. Hasil pengujian secara parsial (uji t) menunjukkan bahwa tidak ada hubungan antara kinerja ESG terhadap return saham perusahaan yang bergabung dalam indeks SRI-KEHATI. Hasil uji F secara simultan menunjukkan ada hubungan signifikan antara kinerja ESG terhadap return saham perusahaan yang tergabung dalam indeks SRI-KEHATI. Kata kunci: ESG; Sri Kehati; return saham.

Purpose This examine the impact of environmental, social and governance (ESG) performance on financial reporting quality (FRQ) before and during COVID-19 in the Egyptian market. Design/methodology/approach This study uses quarterly data from 2017 to 2021 to draw conclusions, with a sample consisting of 486 firm-year observations for 27 Egyptian companies listed on the Standard and Poor’s/Egyptian Stock Exchange ESG index. This study uses both firms’ ESG scores and the Beneish Model, an earnings detection model, as proxies for FRQ. COVID-19 effects on ESG performance and FRQ were examined by using Pearson’s correlation coefficient and two-stage least squares. Findings COVID-19 has a significant impact on the link between ESG and FRQ. This implies that corporations with high ESG performance are less likely to manipulate earnings (having a low M-score) and thus provide high FRQ during the COVID-19 pandemic. Moreover, there is a significant positive relationship between firm size, leverage and M-Score, indicating that large firms typically present a high FRQ. Research limitations/implications The sample size and data availability are the main research limitations. Additionally, this study only considers the effects of firms’ ESG performance on FRQ during the COVID-19 pandemic. Thus, future research should consider other factors associated with investors’ corporate social responsibility (CSR). Practical implications This research has practical implications for market regulators seeking to establish a legislative framework and enhance guidance to mandate managers to provide ESG data and CSR reports appropriate for Egypt and other developing economies in times of crisis. Social implications Promoting the adoption of ESG practices in business, particularly during crises, has the potential to effectively provide high-quality and reliable financial reporting required for investment. Originality/value This study aspires to address notable deficiencies in the pertinent literature concerning the relationship between ESG performance and FRQ during COVID-19. To the best of the authors’ knowledge, little is known about how ESG performance changes in response to pandemics in emerging markets. To address this gap, this study examines the effects of COVID-19 on the relationship between ESG performance and FRQ in Egyptian-listed firms from 2017 to 2021.

With the establishment of China’s “dual carbon” target and the promotion of high-quality development strategy, the role of green innovation has become increasingly important. Corporate ESG innovation, as a guiding principle for companies to practice sustainable development and an important signal for evaluating their environmental and social responsibilities as well as corporate governance level, deserves in-depth research on its impact on green innovation performance. This paper empirically analyzes the green innovation effect of corporate ESG (Environmental, Social and Governance) performance using Chinese A-share listed companies as a sample from 2009 to 2021. The research shows that corporate ESG performance can enhance green innovation performance. Mechanism analysis reveals that ESG performance mainly improves green innovation performance by alleviating financing constraints and enhancing human capital. Further research shows that all three sub-dimensions of ESG performance contribute to improving green innovation performance, with the strongest effect observed in corporate governance performance. ESG performance not only enhances strategic green innovation performance and independent green innovation performance but also improves substantial green innovation performance and collaborative green innovation performance. Therefore, the government should improve the ESG information disclosure system, increase support for companies with excellent ESG performance, and improve local talent policies to attract high-quality green innovation talents. Investors should incorporate ESG performance into their decision-making and strengthen the identification and use of ESG information. Companies should formulate ESG strategies, increase relevant investments, prioritize corporate governance improvement, and enhance the quality of ESG information disclosure through various means.

Background: According to studies on sustainability dimensions – environmental, social, and governance (ESG) – companies that effectively address the stakeholders’ ESG expectations are likely to outperform companies that poorly implement ESG principles. Studies show mixed results of the relationship between ESG and financial performance. Besides, ESG adoption in ASEAN countries is still in early stage compared with European countries or US region. Aim: The purpose of this paper is to investigate the relationship between Environmental, Social and Governance (ESG) performance and firm performance of ASEAN listed companies moderated by company ownership structure. Method: This paper selects publicly listed companies in ASEAN stock exchanges with data period of 2017-2021, a total of 607 companies samples with 1,309 data observations. Refinitiv Eikon ESG rating is adopted in this paper to measure ESG performance while ownership structure is measured in three aspects, which include ownership concentration, equity balances, and institutional investor shareholding. Findings: The research found that (1) ESG performance has negative and significant relation to both market-based and accounting-based firm performances, (2) ownership concentration has no significant moderating role on ESG – firm performance relationship, (3) equity balance is only significant in moderating ESG relationship to Tobin’s Q, meanwhile (4) institutional ownership is found statistically significant in moderating the ESG relationship to Tobin’s Q and ROE but not to ROA.

Can digital transformation improve market and ESG performance? Evidence from Chinese SMEs