Environmental, Social And Governance Research Articles

Gender diversity, corporate social responsibility and real earnings management for policy management decision: evidence from emerging market

Purpose The study aims to examine whether board gender diversity and corporate social responsibility (CSR) affect real earnings management (REM) practices of public companies in Nigeria. Design/methodology/approach The study analyzes data of public companies for the period of 2011 through 2020. Data on board gender diversity, CSR and REM were collected from audited financial statements. Findings The empirical findings show that companies with greater diverse board are effective in restraining REM, thus supporting the theoretical framework of the study. Also, the result provides strong evidence of association between CSR performance and REM for policy management decision. Research limitations/implications The study is constrained by not considering all public companies in the country. Furthermore, it considered only gender among numerous important board attributes and environmental, social and governance (ESG) among numerous CSR attributes. Hence, future studies should consider other important attributes on REM and important attributes of board diversity and CSR on real earnings management. Originality/value To the best of the authors’ knowledge, this study is the first to investigate the relationship between heterogeneous board gender diversity, CSR via ESG and REM in emerging markets such as Nigeria. Therefore, it provides appropriate treatment of CSR with science and technology via EGS viewpoint of organizational operations and behavior of managing earnings. Therefore, developing better policy management for sustainable development

Main contents and implications of the 2023 revision of the OECD Guidelines for Multinational Enterprises*

Purpose This study aims to provide the main contents of the revision of the 2023 OECD Guidelines for Multinational Enterprises and suggest implications for the Korean government and multinational enterprises.Design/methodology/approach Following the brief history of the revision of OECD Guidelines for Multinational Enterprises, this study reviews and evaluates major substantive and procedural revisions of the 2023 OECD Guidelines, and then suggests countermeasures for Korean government and businesses.Findings The most significant substantive change of the 2023 revision is that expectations for environmental due diligence and disclosure obligations, including climate change and biodiversity, for multinational enterprises have been expanded and strengthened. Regarding procedural changes, the biggest change is the introduction of a basis rule for the National Contact Points for Responsible Business Conduct (NCPs for RBC) to judge each issue and a rule that the final statement must include follow-up details and deadlines, which is expected to strengthen the effectiveness of the NCP dispute resolution mechanism.Originality/value This study is the first academic paper to introduce major substantive and procedural revisions to the 2023 OECD Guidelines for Multinational Enterprises in Korea. This study also provides implications for the Korean government and companies following the 2023 revised OECD Guidelines for Multinational Enterprises as follows. First, the Korean government must establish a public–private partnership to closely communicate to prevent Korean companies from being harmed by failing to meet strengthening international Environment, Social and Governance (ESG) standards. In addition, Korean government should actively participate in ESG-related international forums, including the OECD, and strive to reflect the needs and interests of Korean companies. Second, the Korean NCP should strengthen its activities to prevent potential damage by expanding education and promotions for Korean businesses on related overseas legislative trends and NCP dispute case studies so that Korean companies can effectively deal with the strengthened ESG standards. Third, Korean multinational enterprises should preemptively establish an advanced ESG management system to seize new opportunities in the global supply chain previously concentrated in China and India in the process of reorganizing global supply chains according to the trend of strengthening ESG standards and the US value alliance strategy.

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.

The impact of ESG on management tone: Empirical evidence from China

This paper examines the effect and mechanism of ESG (Environmental, Social, and Governance) performance on management tone from the perspective of psychology and behavioral finance. The study found that ESG performance can significantly improve the enthusiasm of managers’ intonation, which is more obvious when the population density of the enterprise is higher. The mechanism analysis shows that the ESG performance of enterprises mainly affects the tone of managers through two channels: reducing financing constraints and improving financial performance. This paper examines the internal logic of ESG practice on managers’ emotional tendencies from the perspective of psychology and behavioral finance, and reveals that ESG practice does not make managers become negative.

Companies' Bottom Lines Are Affected by ESG Factors: A Bibliometric Study

This paper topic related to the environmental, social and governance (ESG) impacts the firm’s performance. Based on 351 papers on the ESG impacts the firm’s performance in the Web of ScienceDirect from 2019 to 2023 and we use VOS viewer in present the bibliometric review for the journal, keyword, authors, and citation structure. Furthermore, the ESG impact the firm’s performance, and this contribute three objective which is to explore the relationship between ESG factors and firm performance, to analyze the role of ESG metrics and reporting standards in assessing and improving firm performance, and to highlight the importance of ESG factors in the firm’s decision-making process and their influence on markets.
  

ESG Performance and Enterprise Value in China: A Novel Approach via a Regulated Intermediary Model

ESG (environmental, social, and governance) performance increasingly influences enterprise valuation. While researchers debate about the precise nature of this influence, most assume a positive linear relationship. This study introduces a novel ESG responsibility performance metric utilizing a regulated intermediary model using representative data synthesized from leading ESG rating agencies in China. It investigates the pathways of this influence and examines the mediating effects of corporate reputation, stakeholder engagement, and regulatory compliance. The findings reveal an inverted U-shaped relationship between ESG performance and enterprise value, moderated significantly by financing constraints. These findings remain robust after accounting for potential endogeneity using instrumental variables. Heterogeneity analysis highlights that this inverted U-shaped relationship depends on the industry characteristics and ownership structures, particularly noticeable in non-polluting and non-state-owned enterprises. Moreover, enhanced ESG performance correlates with a reduced cost of equity financing, thereby augmenting enterprise value. Financial institutions might consider employing innovative financial instruments to diversify their enterprise financing channels and effectively bolster ESG-focused enterprises.

Do MENA firms consider climate risks? Evidence from the relationship between ESG and firm performance

ABSTRACT We investigate the moderating effect of climate risk, measured by Carbon dioxide (CO2) emissions and a Global Climate Risk Index (CRI), on the relationship between Environmental, Social and Governance (ESG) score and firm performance using data on non-financial listed firms in the MENA region during the period 2006–2021. We perform the analysis in two stages, in the first stage, we examine the impact of ESG score on firm performance. The findings show that ESG score has a negative impact on operational and financial performance and a positive effect on market performance. Next, we hypothesize that ESG will have a more positive and stronger impact on firm performance in high than low climate risk countries. The results indicate mixed evidence. In further analysis, we have examined the effect of environmental performance index and net zero initiatives on the relationship of ESG on firm performance.

How to Improve the Environmental, Social and Governance Performance of Chinese Construction Enterprises Based on the Fuzzy Set Qualitative Comparative Analysis Method

The environmental, social and governance (ESG) performance of construction enterprises still needs to be improved. Therefore, in order to better utilize resources effectively to improve enterprise ESG performance, this paper explores the configuration paths for Chinese construction enterprises to improve their ESG performance using the (fuzzy set qualitative comparative analysis) fsQCA method. It was found that single conditions are not necessary to achieve high ESG performance. The improvement of the high ESG performance needs to be combined with synergistic effects of multiple conditions. The specific configuration paths consist of six types of conditions. They are the environmental goal and management-led improvement path, the environmental training and action-led improvement path, the environmental concept and partner protection joint-led improvement path, the environmental and social level synergistic improvement path and the two multifactorial composite improvement paths. Among them, the environmental concepts, environmental goal and management, environmental training and action, and partner protection are the core conditions. The other conditions also have a certain supporting role. This study will help the construction enterprises to effectively allocate resources and develop ESG strategies with limited resources. It will also provide a reference for the government to manage the ESG performance of enterprises.

Trick or treat? A bibliometric literature review of corporate social responsibility and earnings management

AbstractResearch QuestionThis study seeks to examine and synthesize the extant literature to summarize whether the essence of corporate social responsibility (CSR) genuinely stems from an authentic social commitment, or if it primarily serves as a tactic to obscure earnings management (EM) practices.Research MethodologyA systematic literature review methodology is employed to thoroughly assess 75 articles selected from the Web of Science and Scopus databases, integrating bibliometric techniques, and following the Preferred Reporting Items for Systematic Reviews and Meta‐Analyses (PRISMA) guidelines.Research FindingsAmid evolving economic and social landscapes, the research of the CSR‐EM relationship increases, particularly in Asian contexts. Further research found that ESG (environmental, social, and governance) was gradually introduced into the theoretical framework of CSR‐EM. However, most of the research does not study the impact of the three dimensions of ESG, respectively. The study concludes the four varied CSR‐EM relationships: positive, negative, mixed (depending on EM type), and no correlation, and suggests that this should be determined by both macro (e.g., political and economic environment) and micro determinants (e.g., industries and governance). Therefore, the CSR‐EM relationship cannot be simply generalized. At present, most studies study CSR as a whole, and some literature uses CSR disclosure and performance to measure CSR respectively. However, distinctions between CSR disclosure and performance, namely CSR decoupling, remain underexplored.Theoretical and Practical ImplicationsThis review synthesizes four key findings and summarizes seven relevant theories from existing literature, thus enriching the theoretical contributions of CSR‐EM research. It underscores the significance of both macro and micro factors on the CSR‐EM relationship, introduces the concept of CSR decoupling, and outlines directions for future studies. The review offers insights for policymakers on CSR‐EM dynamics and suggests strategies for companies to enhance CSR practices and reporting consistency.

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 impact of ESG on management tone: Empirical evidence from China

<p>This paper examines the effect and mechanism of ESG (Environmental, Social, and Governance) performance on management tone from the perspective of psychology and behavioral finance. The study found that ESG performance can significantly improve the enthusiasm of managers’ intonation, which is more obvious when the population density of the enterprise is higher. The mechanism analysis shows that the ESG performance of enterprises mainly affects the tone of managers through two channels: reducing financing constraints and improving financial performance. This paper examines the internal logic of ESG practice on managers’ emotional tendencies from the perspective of psychology and behavioral finance, and reveals that ESG practice does not make managers become negative.</p>

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.

Women on Board and ESG Performance: Insights from the Italian Utilities Sector

The purpose of this paper is to investigate the relationship between gender diversity and environmental, social and governance (ESG) performance in the Italian utilities sector. The study examines whether the presence of women on the board of directors (BoD) is related to ESG dimensions. We analyzed a sample of 482 utility companies for the period 2018-2022 and we developed an econometric model applying unbalanced panel regression data with firm fixed effects and controls per year. Within a multivariate regression model, the authors considered the ESG score provided by Refinitiv Eikon to test the research hypotheses. Findings show that the presence of women on board of directors improves ESG performance when a critical mass of female board members (at least three) is reached. A critical threshold of female directors also positively influences the scoring of environmental and social pillars. From a managerial perspective this study draws attention to BoD composition encouraging utility companies to define internal corporate governance mechanisms thoroughly. The overall findings support managers, policy makers and regulators on how to improve ESG performance through gender diversity on BoD. This paper offers an in-depth examination of the ESG practices of utility firms, and it attempts to bridge the gap in prior literature on the determinants of ESG performance in the Italian utilities sector. This study is the first that investigates the relationship between board gender diversity and ESG performance in such a context exploring how a critical mass of women on BoD affects ESG dimensions.

The centrality of law for EU sustainable finance markets: Outlining a research agenda

AbstractThis article discusses how law shapes sustainable finance market creation in the European Union (EU). Although markets for environmental, social and governance (ESG) oriented investments have continued to grow, a gap has persisted between fund popularity and real‐world impact. The EU has sought to address this through common legal standards for sustainable economic activities. However, there has been limited empirical examination of how industry applies these new measures and how they facilitate further market development. The article seeks to address this by proposing a research agenda for the examination of sustainable finance legislation through a ‘law as constitutive’ lens. The approach argues for an empirical inquiry that recognises the political and social conditions of market development, explored through interviews with market participants focusing on their experiences of legislation. The article explains how a ‘law as constitutive’ framing best suits the EU context when exploring the potential and limitations of the current policy approach.

Emerging market MNEs, digital transformation and ESG performance: evidence from China’s listed companies

ABSTRACT The importance of emerging market multinational enterprises’ (EM-MNEs) social responsibility has been realized in the literature, but how to enhance EM-MNEs’ ESG (Environmental, Social, and Governance) performance in the digital age has attracted limited attention. This article fills this gap by investigating whether EM-MNEs can improve ESG performance through digital transformation among Chinese listed companies. We employ text analysis techniques to measure the degree of digital transformation within MNEs and further construct a fixed-effects (FE) model to investigate the positive influence of digital transformation on EM-MNEs’ ESG performance. Results show that digital transformation within MNEs is positively related to ESG performance and such effect is verified for non-state-owned enterprises but not for state-owned enterprises. We suggest that MNEs with more foreign subsidiaries are more prone to be influenced by the positive effect of digital transformation on ESG performance than MNEs with fewer foreign subsidiaries. Moreover, the Belt and Road Initiative is valuable for MNEs to reap ESG benefits from digital transformation. The findings enrich international business studies by adding the digital economy and ESG to the discussion. Moreover, they provide valuable implications for policymakers and business leaders in emerging markets by delineating strategies for enhancing the ESG performance of EM-MNEs.

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

Purpose The 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/approach This 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. Findings The 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/value To 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.

Does ESG implementation influence performance and risk in SMEs?

AbstractThe relationship between Environmental Social and Governance (ESG) activities and financial performance has been explored within large companies. The presence of these activities in Small and Medium Enterprises (SMEs) is still in its early stages in the literature, requiring further empirical evidence. Given the importance of SMEs in economy and based on Stakeholder Theory, a set of hypotheses regarding the influence of ESG on financial and risk performance has been tested using a sample of 538 Spanish SMEs. Specifically, an index has been developed to assess ESG at both global and individual levels. The study analyses the impact of these variables on corporate performance, taking into account factors such as the pandemic period, level of disclosure and the size effect. The results demonstrate the importance of developing and index tailored to measuring ESG within this type of company, as the methodology employed can impact the outcomes. Moreover, at the individual level, all dimensions reflect a significant relationship, but the overall ESG score does not. The social and labor dimensions prove to be the most beneficial indices for enhancing resilience during periods of crisis. Finally, the findings confirm that it is more difficult for SMEs to monetize the results of ESG investment and that disclosing these activities has a positive impact. This study contributes to existing knowledge by constructing a robust measure of the level of ESG implementation and quality, providing valuable insights for SMEs on how to effectively manage their ESG activities.

EXAMINING THE EFFECTS OF AND MODERATING INFLUENCES ON ENVIRONMENTAL, SOCIAL AND GOVERNANCE INFORMATION DISCLOSURE ON VALUE-AT-RISK: EVIDENCE FROM CHINESE LISTED COMPANIES

Generally, research on the effects of Environmental, Social and Governance (ESG) information disclosure on listed companies is primarily limited to developed countries. By contrast, the current study is located in China and analyses whether ESG reduces the downside risk of listed companies in China, and whether political connections and institutional investors moderate this relationship. This study uses Chinese A-share listed companies from the Shanghai and Shenzhen stock markets from 2010 to 2021 as research samples. Results demonstrated that the inhibitory effect of enhancing ESG performance on enterprise risk is more significant in non-heavy polluting industries, non-state-owned enterprises, and enterprises in areas with low levels of marketisation. This study explores the economic implications of ESG performance from a Value-at-Risk (VaR) perspective, enriching the relevant research on ESG rating in China and providing a fresh perspective to better elucidate the economic significance of companies improving their ESG performance. This study introduces institutional investors and political connections as two moderating variables to analyse their effect on the relationship between ESG performance and VaR. In addition, heterogeneity analysis is carried out in combination with the industry, region, and ownership nature of listed companies to test the “insurance” and “information” effects of ESG performance, to provide decision-making references for investors, enterprise managers, and regulators.

Sustainability scoring tool for real estate according to German and European valuation principles in the purchasing process

PurposeSustainability has become an integral part of the real estate industry, alongside advancing globalization and demographic development. Due to real estate's influence on greenhouse gas emissions throughout its life cycle, both the regulatory and legal requirements concerning the sustainability of real estate are growing and, as a result of social responsibility, the interest of tenants and investors in sustainable real estate. However, criteria for measuring the ecological sustainability of a real estate investment in the purchase process in order to reduce the risk of including “stranded assets” in the portfolio are missing. This paper aims to address the need to integrate the issue of carbon stranding into existing sustainability rating tools.Design/methodology/approachExisting tools are examined based on defined criteria to determine whether they are suitable for purchasing a property before suitable tools for purchase are compared. Strengths and weaknesses are identified, which are to be remedied with the scoring tool. Taxonomy regulation is integrated into the existing valuation basis as a legal regulation.FindingsThe result is a scoring tool that enables real estate companies to measure and evaluate the ecological sustainability performance of a property during the acquisition process, taking into account the three aspects of sustainability and considering them when determining an appropriate purchase price in line with market conditions. Moreover, the developed tool helps to minimize the risk of acquiring a stranding asset.Research limitations/implicationsThe environmental, social and governance (ESG) framework employed in this study does not incorporate governance considerations. While the analysis extensively evaluates the building's environmental and social aspects, it does not extend to examining the governance practices of the companies involved. Thus, the assessment is confined solely to the physical attributes of the property without accounting for broader corporate governance factors.Practical implicationsThe developed scoring tool represents a valuable tool for the real estate industry, offering insights into sustainability performance during property acquisitions and providing a structured framework for decision-making. By addressing both certification and taxonomy regulation requirements, the tool contributes to the industry's evolution toward more sustainable and environmentally responsible real estate practices.Originality/valueIn response to the growing importance of sustainability in the real estate industry, this paper introduces a novel scoring tool for evaluating the sustainability of real estate investments during the acquisition process.

Does ESG performance affect the systemic risk sensitivity? Empirical evidence from Chinese listed companies

PurposeThis paper aims to examine the relationship between environmental, social and governance (ESG) performance and systemic risk sensitivity of Chinese listed companies. From the consumer loyalty and investor structure perspectives, the relationship between ESG performance and systemic risk sensitivity is analyzed.Design/methodology/approachSince Morgan Stanley Capital International (MSCI) ESG officially began to analyze and track China A-shares from 2018, 275 listed companies in the SynTao Green ESG testing list for 2015–2021 are selected as the initial model. To measure the systematic risk sensitivity, this study uses the beta coefficient, from capital asset pricing model (CPAM), employing statistics and data (STATA) software.FindingsThe study reveals that high ESG rating companies have high corresponding consumer loyalty and healthy trading structure of institutional investors, thereby the systemic risk sensitivity is lower. This paper reveals that companies with high ESG rating are significantly less sensitive to systemic risk than those with low ESG rating. At the same time, ESG has a weaker impact on the systemic risk of high-cap companies than low-cap companies.Practical implicationsThe study helps the companies understand the influence of market value on the relationship between ESG performance and systemic risk sensitivity. Moreover, this paper explains explicitly why ESG performance insulates a firm’s stock from market downturns with the lens of consumer loyalty theory and investor structure theory.Originality/valueThe paper provides new insights on the company’s ESG performance that significantly affects the company’s systemic risk sensitivity.