Not all faultlines are created equal: The heterogeneous impact of TMT faultlines on a firm's ESG disclosure

Abstract

AbstractDriven by the theory of sustainable development, Chinese firms have gradually realized the importance of ESG disclosure. Executives play a core role in ESG decision‐making, but whether and how top management team (TMT) faultlines affect ESG disclosure has yet to be systematically discussed. Based on the attention‐based view and faultline theory, we select 6456 observations of 910 Chinese A‐share listed firms from 2012 to 2021 as the research object to empirically test the above critical practical issues that have not been fully answered. We find that TMT information‐based faultlines improve firms' ESG disclosure, but TMT social category faultlines reduce firms' ESG disclosure. In addition, the internal mechanism test showed that the TMT's future‐oriented attention plays a mediating role in the above relationship. Finally, we also find that institutional shareholding enhances the positive impact of the TMT's future‐oriented attention on ESG disclosure. This study enriches the literature on TMT faultlines and ESG disclosure, demonstrating that the composition of the TMT and its attention allocation are important factors for promoting firms' ESG disclosure. The conclusions of this study can help firms strengthen their ESG disclosure by building efficient TMTs and provide important implications for firms to better fulfill their ESG responsibilities.