Environmental, Social And Governance Disclosure Research Articles

Mitigating the bullwhip effect through supply chain ESG transparency: roles of digitalization and signal strength

PurposeThe call for supply chain transparency (SCT), especially the environmental, social and governance (ESG) aspect, is getting increasingly louder. Based on the signaling theory, our study investigates the operational benefit of supply chain transparency in terms of ESG (SCT-ESG). To further clarify the signaling process, the moderating roles of digitalization of the firm and signal strength are also examined.Design/methodology/approachLongitudinal secondary data from multiple databases are matched and analyzed using ordinary least squares (OLS) regressions to validate the proposed hypotheses.FindingsResults suggest that with SCT-ESG, firms have a weakened disparity between production variance and demand variance, and the supply chain experiences a reduced bullwhip effect. Further, digitalization of the focal company and signal strength reinforce the negative effect of SCT-ESG on the bullwhip effect.Originality/valueThe study integrates the SCT and ESG literature through SCT-ESG, extending benefits of ESG disclosure to the supply chain context. It extends the application of the signaling theory in OSCM by including contextual factors of digitalization and signal strength.

Does corporate governance influence environmental, social and governance disclosure practices of state‐owned enterprises? An international study

AbstractThis paper provides fresh insights into the impact of corporate governance mechanisms on environmental, social and governance (ESG) disclosure practices of state‐owned enterprises (SOEs). To accomplish this study's research objective, we collected ESG and corporate governance data from Refinitiv Eikon's database on a balanced sample of 253 SOEs from 37 worldwide countries over 5 years (2018–2022), obtaining a total of 1265 observations. A battery of fixed and random effects panel regression models has been estimated to test the impact of board characteristics, like board size, board independence, board gender diversity, number of board meetings, Chief Executive Officer (CEO) duality and the presence of a corporate social responsibility (CSR) committee, on overall and individual ESG disclosure scores of sampled SOEs. Results show that while board size and CEO duality negatively affect SOE ESG disclosure, board independence and gender diversity, as well as the number of board meetings and the existence of a CSR committee, exert a positive influence.

Impact of ESG Score on Stock Performance in Banking and IT Sector

The awareness regarding Environmental, Social and Governance (ESG) has grown a lot in the recent past years. The paper mainly aims at investigating whether there is an existing relationship between the disclosure by the companies from the industry of Banking and Information Technology based upon Environmental, social and governance framework and the stock performance of the companies of the same industry. The study took variable as the ESG Score and annual share price of the top 5 companies each of Banking and Information Technology present in the NSE ESG INDEX between the FY2014 to FY 2023. The study has used correlation and ANNOVA to analyse the impact that ESG score has upon the share prices of the target companies. We have attained observation through our studies that the relationship that exists between the SDG score of 8 companies out of the 10 companies selected as a sample is significantly positive. This study mainly aims to determines the relationship amongst ESG disclosures and stock prices and if the relationship is positive, negative or neutral. Keyword - ESG disclosure, ESG index, ESG Score, Stock Price, Firm performances

Indonesia Shariah Stock Index (ISSI) firms and environmental, social, and governance (ESG) disclosure in Indonesia

Purpose This study aims to examine the relationship of Indonesia’s Sharia Stock Index (ISSI) firms on environmental, social and governance (ESG) disclosure. This study is interesting because ISSI firms are supposed to comply with Islamic values as this has been reflected in good corporate governance activities, demonstrating responsibility to others and participating in preserving nature/environmental activities. Design/methodology/approach The authors use sample firms that are listed on the Indonesia Shariah-compliant Stock Index (ISSI) from 2011 to 2020, which also published sustainability reports. Findings The study found that sharia firms are positively related to ESG disclosure. The authors also found that ESG disclosure of sharia firms is more pronounced in the reporting section of general, economic, environmental and social. Other findings suggest differences in the segments reported in the COVID and pre-COVID periods. This result is also robust by conducting a self-selection bias test with Heckman’s two-stage regression and Coarsened Exact Matching regression. Practical implications For policymakers, these results indicate that different characteristics of firms can affect ESG disclosure, and economic conditions will determine which sectors are disclosed the most. Originality/value This study provides empirical evidence that Indonesian Shariah-compliant stock index firms carried out their mission to disclose more information about their environmental and social responsibilities and governance issues.

Gender of firm leadership and environmental, social and governance (ESG) reporting: evidence from banks listed on Ghana Stock Exchange

Purpose This study aims to examine how woman corporate leadership indicators and environmental, social and governance (ESG) disclosure in listed banks on Ghana Stock Exchange are related. Design/methodology/approach Data was obtained from the audited annual reports of the banks for the period 2006–2020. Empirical result estimation was achieved using Panel Corrected Standard Errors. Findings The result revealed that female chief executive officer (CEO), female board chairperson and board gender diversity are associated with higher disclosure of ESG issues in listed banks in Ghana in overall terms. However, in terms of individual disclosures, female board chairperson positively impacts social disclosure, whereas both female CEO and female board chairperson affect governance disclosure positively. Research limitations/implications In this era of business where there is much emphasis on green business and investment by various stakeholders for purposes of ensuring business legitimacy, the result implies that banks must consider females to occupy the positions of CEO and board chairperson since that can help to improve ESG performance of banks. Practical implications In this era of business where there is much emphasis on green business, socially responsible investment and impact investment by various stakeholders, the result implies that banks must consider improving the representation of women in leadership since that can help to improve ESG performance of banks and hence ability to attract more investors. Originality/value To the best of the authors’ knowledge, this is the first study to provide empirical evidence from a developing country perspective in Sub-Saharan Africa that gender of bank leadership has implications for ESG disclosure.

The value of a ‘just’ firm

Purpose The study aims to investigate market reactions associated with the JUST 100 rankings published by JUST Capital, a non-profit organization, as well as differences in financial reporting quality and performance between selected firms and their industry peers. Design/methodology/approach This study uses a sample of 431 firms selected as the 100 America’s Most Just Companies between 2016 and 2020 by JUST Capital. This study performs both an event study to determine whether the rankings are useful to investors and cross-sectional regression analyses on the characteristics of selected firms compared to their peers. Findings This study finds that investors react positively to selected firms around the time of the release of the JUST 100 rankings, suggesting that the rankings are decision-useful. This study also finds that selected firms exhibit higher accounting quality and financial performance than their peers. Research limitations/implications Rankings may not be free from bias because of JUST Capital’s ownership of an exchange-traded fund. Social implications The findings validate the rankings as well as the methodology used by JUST Capital, as they show market participants value firms that engage in socially responsible actions through their commitment to positively impact five key stakeholder groups: employees, customers, communities, environment and shareholders. Originality/value To the best of the authors’ knowledge, this is the first study that shows the importance of the JUST 100 rankings for investment decisions. Considering the growing push for companies to disclose environmental, social and governance (ESG) activities, this study provides evidence to support ESG disclosure regulations.

Unveiling the ESG-dividend nexus: the moderating role of investor protection and regulatory enforcement

PurposeThe mounting focus on environmental, social and governance (ESG) factors in business has sparked substantial curiosity in understanding the nexus between ESG and the companies’ strategic decisions. This study aims to investigate the influence of firms’ ESG disclosure scores on their dividend payout. Furthermore, it examines the nuanced dynamics of this relationship by exploring the moderating role of the country’s investor protection regulations and regulatory enforcement.Design/methodology/approachThis study uses pooled ordinary least square regression with year, industry and country effects. It analyzes a balanced panel data set of 192 non-financial firms drawn from the primary equity indices of BRICS nations. This study examined the data of six years spanning 2015–2020.FindingsThe findings discover a significantly positive relationship between ESG scores and dividend payout ratio, conveying that firms with higher ESG scores allocate more of their profits as dividends. Furthermore, the finding reveals that country-level robust investor protection and effective regulatory enforcement mechanisms undermine the positive association between ESG ratings and payouts of dividends, suggesting that the ESG disclosure of firms operating in a setting characterized by enhanced investor safeguards and stricter regulatory oversight will exert less influence on their dividend decisions.Originality/valueTo the best of the authors’ knowledge, this is the first study to concentrate on the ESG–dividend nexus in the BRICS countries. Furthermore, this study used each country’s investor protection index and regulatory enforcement scores to comprehend the influence of country-level legal frameworks in shaping the relationship between ESG and dividend decisions, thus adding value to the existing literature on corporate sustainability.

Assessing the effect of core and expanded ESG on corporate financial performance: COVID-19’s moderating role

PurposeThis study aims to investigate the influence of disclosing environmental, social and governance (ESG) factors on financial performance, taking into account the moderating effect of the COVID-19 pandemic.Design/methodology/approachA sample of the top 100 non-financial firms listed on the Bombay Stock Exchange, for the years 2019–2022, has been considered. Suitable panel regression models have been used to assess the impact of non-financial disclosure on accounting and market measures of firm performance. In addition, a panel data moderating effect model is used to assess the moderating impact.FindingsThe outcomes of the study partially favour the value-creation role of ESG disclosure. Specifically, the disclosure of already established ESG metrics, particularly social and governance aspects, positively impacts the market performance while environmental transparency negatively impacts the accounting performance. Of the three ESG components, only extended governance disclosure adds to market value. Results of the moderation effect reveal a significant impact of the pandemic on the ESG disclosure–financial performance relation. However, a more pronounced effect before the pandemic is observed. The results are robust to endogeneity.Originality/valueThis study sheds light on the financial consequences of ESG disclosure within the context of an emerging nation. This is done by using a novel holistic ESG reporting framework to obtain more accurate results. Furthermore, the study distinguishes itself by examining the long-term moderating influence of the unexpected COVID-19 crisis on the ESG disclosure–financial performance relation.

Can ESG disclosures promote firms going concern? Evidence from BRICS countries

AbstractThis study examines the moderating role of managerial ownership on environmental, social and governance (ESG) disclosures and the going concern of chemical manufacturing firms in Brazil, Russia, India, China, and South Africa (BRICS) countries. We employed a quantitative research methodology, using panel data from 236 listed firms operating in the chemical manufacturing sector between 2007 and 2022. For the analysis, we utilized the Augmented Mean Group and the Common Correlated Effects Mean Group estimators. The results showed that ESG disclosures significantly impact the continued existence of chemical manufacturing companies in BRICS nations. Additionally, high managerial ownership exerts a significant positive influence on the association between ESG disclosures and the going concern of chemical manufacturing firms. The findings affirm the need for businesses to disclose their ESG issues to stakeholders to ensure carbon neutrality goals for BRICS. Hence, it is recommended that policymakers and business owners promote and incentivize managerial ownership, recognizing its pivotal role in enhancing the positive relationship between ESG disclosure and firms' continuity, thereby contributing to the realization of carbon neutrality goals in the BRICS region.

Analysis of the Environmental, Social, and Governance (ESG), Retention Ratio, and Leverage Impacts on Stock Returns with Company Value as a Moderation Variable

Efforts to enhance company performance through adherence to corporate governance principles are demonstrated in the company's comprehensive ESG (Environmental, Social, and Governance) disclosures. In evaluating these disclosures, it is imperative to weigh the impact of leverage and retention ratio. The survey conducted by Globescan and the Global Reporting Initiative (GRI) has revealed a significant lack of awareness regarding the importance of these factors among typical companies in Indonesia. Hence, this study examined the ESG, retention ratio, and leverage impacts on stock returns with company value as a moderation variable. The samples of this study comprised 14 financial companies listed on the Indonesia Stock Exchange within the timeframe of 2018-2022. Data for the analysis were extracted from the IDX website and the official websites of the respective companies. Employing Eviews 9 software, multiple linear regression analysis was conducted to unravel insights into the relationships under scrutiny. The discerned outcomes unveiled that neither ESG nor leverage significantly impacted stock returns. In contrast, the retention ratio emerged as a potent factor with a noteworthy influence. The company value could moderate the ESG and the retention ratio impacts on stock returns, yet it proved ineffective in moderating the leverage impact on stock returns.

Beyond Size: How ESG Factors Shape Bank Value in India & China

Objective: This study examines the impact of ESG (environmental, social, and governance) factors on the market capitalization of banks in India and China. Specifically, it analyses the relationship between total assets, female board representation, social and environmental disclosures, and market capitalization.
 Methods: A comparative analysis of leading banks in India and China is conducted using 10 year (2013–2023) data using structural equation modelling (SEM) on market capitalization, total assets, ESG disclosures, and female board representation.
 Results: A positive and significant relationship is found between total assets and market capitalization in both India and China, indicating that investors value larger banks. In India, female board representation doesn't significantly impact market capitalization, while in China, a higher proportion may lead to lower market capitalization, requiring further research. A positive and significant relationship is found between social and environmental disclosures and market capitalization in both countries. However, the effect is stronger in India, indicating that Indian investors place greater value on banks with robust sustainability practices.
 Conclusions: This study highlights the growing importance of ESG factors in the banking sector, with varying degrees of emphasis depending on the country. While both Indian and Chinese investors value larger banks, Indian investors seem to place more weight on female board representation and social-environmental disclosures, while Chinese investors appear to prioritize other factors. Further research is needed to explore the underlying reasons for these differences and the complex interplay between various ESG factors and market performance.

THE EFFECTS OF ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) DISCLOSURES ON FINANCIAL PERFORMANCE: A THEORITICAL APPROACH

The implementation of environmental, social and governance (ESG) principles by companies continues to be a topic that is often discussed in international forums. Many negative impacts on the environment that are feared to have a fatal impact around the world make the issue a major concern. This research uses a qualitative method, which aims to provide a preposition of ESG measurement on the company's financial performance. The data collection technique in this study uses a literature survey. The results of this study indicate that the company's commitment to good ESG disclosure is able to produce more transparent financial reporting and corporate performance reporting. This is considered by stakeholders as an important approach in presenting transparent and accountable information. Therefore, the company's ESG disclosure is considered to be able to improve the company's financial performance.
 Keywords: Environmental, Social, Governance, ESG Disclousures, Financial Performance

Negative media coverage of ESG issues and corporate tax avoidance

PurposeThis study aims to investigate the role of negative media coverage of environmental, social and governance (ESG) issues in deterring tax avoidance. Inspired by media agenda-setting theory and legitimacy theory, this study hypothesises that an increase in ESG negative media coverage should cause a reputational drawback, leading companies to reduce tax avoidance to regain their legitimacy. Hence, this study examines a novel channel that links ESG and taxation.Design/methodology/approachThis study uses panel regression analysis to examine the relationship between negative media coverage of ESG issues and tax avoidance among the largest European entities. This study considers different measures of tax avoidance and negative media coverage.FindingsThe results show that negative media coverage of ESG issues is negatively associated with tax avoidance, suggesting that media can act as an external monitor for corporate taxation.Practical implicationsThe findings have implications for policymakers and regulators, which should consider tax transparency when dealing with ESG disclosure requirements. Tax disclosure should be integrated into ESG reporting.Social implicationsThe study has social implications related to the media, which act as watchdogs for firms’ irresponsible practices. According to this study’s findings, increased media pressure has the power to induce a better alignment between declared ESG policies and tax strategies.Originality/valueThis study contributes to the literature on the mechanisms that discourage tax avoidance and the literature on the relationship between ESG and taxation by shedding light on the role of media coverage.

The impact of a firm’s ESG score on its cost of capital: can a high ESG score serve as a substitute for a weaker legal environment

PurposeThis article aims to analyse the relationship between the environmental, social and governance (ESG) score and the cost of capital of 600 large, mid and small capitalization companies across 17 countries that are component of the EURO STOXX 600 Index. By examining whether ESG has an impact on the cost of capital, this article contributes to the solutions to improve the impact of organizations and societies on sustainable development. The article further examines whether the effect is because of the environmental, social and/or governance components. In addition, the article analyses which WACC component (i.e. the cost of equity, the cost of debt, the beta or the leverage ratio) is affected. Furthermore, this article analyses whether a high ESG score can substitute for a weaker legal environment.Design/methodology/approachThe results were obtained by using ordinary least squares panel data modelling to analyse the relationship between the ESG score and the cost of capital. The sample consists of companies that are part of the STOXX Europe 600 Index over the period 2018–2021, which is composed of 600 companies, including large, mid and small capitalization firms listed across 17 countries. The sample finally includes 1,960 firm-year observations.FindingsCompanies with a higher ESG score tend to have a lower cost of capital, but this relationship holds only for firms domiciled in countries with a weaker legal environment. In addition, these firms should not only increase their ESG score to create a more sustainable environment but also to reduce their cost of debt. Environmental and social factors have a significantly negative impact on the cost of capital only in countries with a weaker legal environment, while the governance component positively impacts the cost of capital by allowing firms to borrow more.Research limitations/implicationsThere is not yet a standardized taxonomy to define ESG, making the study dependent on commercial data providers.Practical implicationsThe new insights can be used by companies domiciled in countries with weaker legal environments to reduce their cost of capital. The results also allow us to know on which components of the ESG score to focus. It can also help policymakers, specifically those in countries with a weaker legal environment, to provide incentives to further stimulate ESG investments and disclosure, thereby contributing to a more sustainable society.Social implicationsTo achieve the sustainable development goals put forward by the United Nations, it is important for firms to invest in ESG projects. It is nevertheless insightful to know whether these ESG investments, which are currently observed as a cost, also provide benefits to firms and in which countries. If firms clearly see the advantages of investing in ESG projects, they are likely to proactively engage in them.Originality/valueThis article is the first, to the best of the authors’ knowledge, to focus on 17 European countries, thereby capturing divergent legal environments. This setting allows us to answer the main novel research question, namely, whether the ESG score can act as a substitute for the legal environment in which the company is domiciled. The article also goes further than previous articles by examining whether the effect is because of the environmental, social and/or governance component and whether these impact the components of the weighted cost of capital, namely, the cost of equity, the cost of debt, the beta or the leverage ratio of the companies.

Examining the impact of liquidity creation on bank stability in the Asia Pacific region: Do ESG disclosures play a moderating role?

The global financial crisis reignited concerns regarding the stability and sustainability of banks. Since liquidity creation (LC) is a core output of banks, we examine if the nexus between LC and bank stability is conditional on ESG (environmental, social, and governance) disclosure by banks. Our sample comprises 178 commercial banks (1568 observations) during the period 2010–2019 in the Asia-Pacific region. Using a two-step system GMM estimation, our results document a positive impact of LC on bank stability. Additionally, ESG disclosures positively moderate the stability effect of LC, i.e., higher LC is associated with significantly more enhancement in bank stability for banks that have a higher disclosure of ESG scores compared to banks that have a moderate disclosure. Furthermore, we also provide evidence of variation in the moderating role of ESG disclosures in advanced and emerging economies. Overall, our results recommend that integrating ESG practices into banks' internal processes improves their financial soundness. Additionally, blanket implementation of liquidity regulations might be detrimental to banks’ stability.

THE ROLE OF ESG DISCLOSURE PRACTICES IN INVESTMENT DECISIONS

Purpose: This study explores the role of ESG disclosure practices on investment decisions, focusing on how this information is used by investors for risk assessment and informed choice. It is essential for expanding knowledge about the monetary advantages of sustainable activities. In order to support investors, enhance their ESG practices and promote a more ethical and sustainable business environment, the research attempts to provide insightful analysis and actionable suggestions. Design: This paper delivers a thorough examination of the role served by ESG disclosure practices during the entire process of investment decision-making. Moreover, it furnishes insights pertaining to the advantages, challenges, opportunities for enhancement, and prospective developments linked to these practices. Finding: The findings from the case study unveil novel perspectives on how ESG disclosure practices influence investment decision-making, offering potential assistance to investors in refining their strategies and cultivating a financial system with a stronger emphasis on sustainability. This significantly expands ESG integration knowledge, offering valuable insights for stakeholders pursuing a sustainable financial future. Originality value: ESG disclosure has a crucial part in investment decisions by providing valuable information about a companys ESG performance. This information helps assess risks and opportunities, identify investment themes, and determine effective choices. Companies with robust ESG disclosure attract and retain investors, while investors factoring in ESG considerations enhance their potential for long-term returns. Paper type: Case Study KEYWORDS: ESG (Environmental, Social, and Governance), Investment decision, SWOT Analysis, individual investors, ESG integration.

ESG Disclosure Model and Financial Performance: ThThe Mediating Role of Leader Exemplarity in Sustainable Organizations

The purpose of this research is to investigate how implementing Environmental, Social, and Governance (ESG) in a planned, measured, and sustainable manner might improve the performance of the OJK in Indonesia. A quantitative technique is used in this associative research. The quantitative approach focuses on the numerical measurement of study variables and data analysis using static processes and systematic modelling to investigate parts, phenomena, and relationships. From the beginning to the end, this quantitative research method is specific and well-planned. In environmental, social and governance (ESG) performance was found to be positively correlated with financial success among companies included in the Jakarta Islamic Index Indonesia (JII). Although the leadership quality of companies listed on JII is positively correlated with environmental and social performance, this quality is not significantly correlated with governance performance. The presence of the leadership variable as a variable that moderates ESG disclosure on enhancing firm financial performance as evaluated by the capped free float index or the weight of company shares listed on the Jakarta Islamic Index is novel in this study.

Theories underlying environmental, social and governance (ESG) disclosure: a systematic review of accounting studies

PurposeEnvironmental, social and governance (ESG) disclosure has gained momentum in corporate reporting. Addressing a research gap on the subject, this paper aims to explore the theories involved in ESG disclosure studies, thereby shedding light on the dominant theoretical approaches and emerging perspectives that inform this type of disclosure.Design/methodology/approachA systematic review of 142 selected accounting studies published up to June 2023 devoted to ESG – and corporate social responsibility (CSR) – disclosure was conducted. The theories underlying these studies were examined through a descriptive performance analysis complemented by a systematic qualitative text analysis using RStudio and QDA Miner software tools.FindingsThe study reveals that five dominant theories stand out among the overall 32 found: stakeholder theory first, followed by legitimacy, institutional, agency and signaling theories. Theories are often combined into an integrated theoretical framework. The findings also show an array of minor constructs – many of them unconventional – that offer fresh perspectives for studying ESG disclosure, such as upper echelons, stakeholder salience, cognitive cost and reputation theories, among others.Originality/valueThis paper provides an original literature contribution by offering a comprehensive overview of the mainstream and niche theoretical perspectives underpinning accounting studies focused on ESG disclosure, with a nuanced scope of discussion on the use of ESG/CSR terms.

The Value Relevance of Sustainability Disclosure Quality

   In the contemporary landscape, ESG (environmental, social, and governance) performance has emerged as a pivotal concern for capital market investors. Despite its prominence, the ongoing debate in the literature regarding the value relevance of ESG underscores the need for empirical insights. This study addresses this gap by investigating the moderating role of ESG disclosure quality in shaping the relationship between earnings, annual changes in earnings, and stock returns. Drawing on a dataset comprising 254 firm-year ESG reports in Indonesia from 2017 to 2022 and employing panel data regression, the research unveils compelling results. It demonstrates that high-quality ESG disclosure not only reinforces the impact of earnings and annual changes in earnings on stock returns but also signifies a lower risk of future sustainability and long-term growth. These findings substantiate the idea that robust integration of sustainability principles in business practices contributes significantly to the creation of shareholder value. Importantly, this research carries profound implications for Indonesian companies, emphasizing the critical role of ESG disclosure in fostering sustainable business practices and enhancing shareholder value in the evolving landscape of capital markets. 

The impact of non-financial disclosure on labor investment: International evidence

This study examines the impact of non-financial disclosure (NFD) on firms' labor investment efficiency. We analyze a broad sample of firms located across 44 countries and the period 2006–2019. Using regression analysis, the association between abnormal employment growth and environmental, social and governance (ESG) disclosure volume is evaluated. Preliminary evidence reveals that this association is, in general, negative, with NFD exerting a positive influence on labor investment efficiency. Importantly, we also find that the country's institutional and legal background modulates the association, in that the link is markedly stronger in countries with higher-quality investor protection, rule of law and anti-self-dealing devices. Finally, we document stronger effects of ESG disclosure in countries featuring higher labor market rigidities and unionization rates, even after controlling for the country institutional and legal background.