ESG Disclosure Research Articles

Does the presence of a sustainability committee strengthen the impact of ESG disclosure on tax aggressiveness? Insights from North America

AbstractWe investigate the influence of ESG disclosure on tax aggressiveness within the North American Travel and Leisure (T&L) sectors, specifically examining the role of sustainability committees in this relationship. Our analysis utilizes longitudinal panel data from the USA B3000 and Canadian S&P/TSX indices over the period from 2010 to 2020. Employing fixed-effects panel quantile regression with two distinct measures of tax aggressiveness, our findings indicate that firms with a focus on ESG tend to display higher levels of tax aggressiveness. This suggests that some companies might use strong ESG performance as a facade to obscure aggressive tax strategies. Moreover, our research introduces new evidence that the existence of sustainability committees can both hinder corporate tax aggressiveness and foster an ethical corporate culture, which aligns higher ESG engagement with lower tax aggressiveness. Our study underscores the importance of fostering tax compliance in T&L companies, emphasizing that individuals and corporations, which often seek direct state benefits, regard robust public services as essential for encouraging adherence to tax regulations. Furthermore, sustainability committees play a crucial role in enabling firms to address broader social issues, including tackling tax aggressiveness, thus shaping their sustainability agendas.

Empirical evidence of ESG premium in the U.S. corporate bond market: a propensity score matching approach

ABSTRACT This study aims to explore the connection between ESG scores and corporate bond performance, particularly credit spreads, by adopting a propensity score matching (PSM) approach, enabling a balanced comparison between a control group and one exposed to the ESG treatment effect. The results indicate that bonds issued between 2010 and 2020 by MSCI-rated ESG leaders across all industry sectors are priced at an average lower credit spread of 14.3 basis points (bps) relative to laggards, in the primary market. This credit spread difference persists in the secondary market and increases further when bonds of financial issuers are separated from non-financial sectors. In contrast, the impact of ESG disclosure on bond credit spread results is negligible. The willingness of investors to accept a discount on the credit spreads of a bond issued by highly rated companies offers potential incentives for broader adoption of ESG performance assessment.

Integrated Reporting, ESG Disclosure, Forecast Accuracy, and Firm Value: Profitability as Moderating Variable

Objective: This study investigate how the quality of IR and ESG disclosures can affect the level of information asymmetry and enhance legitimacy and signal about firm value. Theoretical Framework: IR will increase the company's transparency to stakeholders so that reduces the problem of information asymmetry and long-term business value creation. SDGs encourages organizations to pursue credentials by implementing ESG to increase corporate credibility. High profitability can provide positive signals that encourage managers to implement IR and submit ESG reports, thereby reducing information asymmetry and increasing firm value. Method: Based on data from the IDX database, this study analyses companies that are members of the LQ45 group. We have collected annual reports and sustainability reports for the period between 2013 and 2022. Results and Discussion: IR quality has a negative influence on FA and firm value, while ESG disclosure has a positive influence on FA and firm value. Profitability variable is able to strengthen the effect of IR quality and ESG disclosure on FA. Therefore, IR quality and ESG disclosures have a strong influence on FA. Research Implications: Theoretically, this study’s result strengthen the study of legitimacy and institutional theories in explaining the relationship between IR quality and sustainability disclosures on information asymmetry and firm value in the long run. Practically, it highlights the importance for managers to enhance IR and ESG disclosures, thereby promoting corporate transparency and accountability. Originality/Value: This considers profitability variables to understand the motives and drivers of managers to implement integrated reporting formats and deliver sustainability reporting.

Do Commercial Ties Influence ESG Ratings? Evidence from Moody's and S&P

ABSTRACTWe provide the first evidence that conflicts of interest arising from commercial ties lead to bias in environmental, social, and governance (ESG) ratings. Using the acquisitions of Vigeo Eiris and RobecoSAM by Moody's and S&P as shocks to the commercial ties between ESG rating agencies and their rated firms, we show that, after their acquisitions by the credit rating agencies (CRAs), ESG rating agencies issue higher ratings to existing paying clients of the CRAs. This effect is greater for firms that have more intensive business relationships with the CRAs, but weaker for firms with more transparent ESG disclosures or higher long‐term institutional ownership. The upwardly biased ESG ratings help client firms issue more green bonds and enable the CRAs to maintain credit rating business. Finally, the upwardly biased ESG ratings are less informative of future ESG news. Overall, the business incentives of rating providers appear to engender ESG rating bias.

Does ESG Disclosure Improve Green Innovation Performance of New Energy Enterprises? Evidence from China

Does ESG Disclosure Improve Green Innovation Performance of New Energy Enterprises? Evidence from China

How Covid-19 Has Changed Safety in the Car Transportation Sector: A Corpus-Assisted Analysis of Non-Financial Reports

The importance of people’s safety during Covid-19 has resulted in greater attention to this aspect in CSR and ESG disclosures, especially in the field of transport. The relevance of this topic is also reflected in the recent publication of linguistic studies that investigate how companies in some sub-sectors communicate their commitment to passengers’ safety (Rossato & Nocella, 2022; Bondi & Nocella, 2023). This paper explores how safety is discursively constructed and communicated in the car rental and ride sharing sectors, both before and during the pandemic. Working along the lines of corpus-assisted discourse studies (Partington et al., 2013), the research analyses a corpus of English CSR and ESG reports published by international American companies in the above-mentioned fields of transport. Findings suggest a great concern for safety issues and a more inclusive approach to both customers’ and employees’ safety during the pandemic. Additionally, car rental companies show more attention to vehicle safety, while ride sharing operators put more emphasis on road safety. Evidence also suggests that the companies largely employ commissive statements and vague linguistic choices that signal a general lack of transparency on the practices and initiatives enacted to ensure customers’ and workers’ safety.

The Double Materiality Audit: Attestation of ESG Disclosures in Financial Statements

SYNOPSIS Auditors are required to evaluate the reliability of financial numbers and potentially provide attestation of environmental, social, and governance (ESG) claims disclosed in financial statements. Double-materiality refers to assessing materiality from two aspects: first, the extent necessary for an understanding of the company’s financial position, and second, the ESG impact of the company’s activities on a broad range of stakeholders. For an audit, these are interconnected, meaning that despite their inherently nonfinancial nature, ESG factors are closely associated with financial outcomes and potential business risks. This research provides an understanding of such a double materiality audit by recognizing the role of external auditors regarding the interaction between a financial audit and ESG attestation and suggests an audit analysis roadmap that incorporates both quantitative and big ESG data. Specifically, it proposes extended audit procedures for data collection, verification, and analysis and highlights the ongoing challenges and opportunities. JEL Classifications: G18; G30; G32; G38; M14; M41; M42; M48.

Mandatory corporate ESG disclosure and default risk – Evidence from China

Mandatory corporate ESG disclosure and default risk – Evidence from China

ESG disclosure quality and cost of debt

ESG disclosure quality and cost of debt

ESG certification, green innovation, and firm value: A quasi-natural experiment based on SynTao Green Finance's ESG ratings: A pre-registered study

This pre-registered study executes the empirical design approved in the associated pre-registered report (Bai et al.,2024) to investigate the impact of environmental, social, and governance (ESG) certification on green innovation and firm value. Using the first release of ESG ratings by SynTao Green Finance as a quasi-natural experiment, the study reveals several key findings: 1) ESG certification significantly increases the quantity of green innovation while demonstrating no substantial impact on its quality. 2) the increase in green innovation quantity is primarily driven by the alleviation of financing constraints and enhanced monitoring, while the quality remains unaffected due to managerial opportunism. 3) the quality of green innovation significantly enhances the positive impact of ESG certification on firm value, whereas the quantity of green innovation does not have a significant moderating effect. These findings provide significant implications for firms aiming for green development and for emerging markets seeking to improve ESG disclosure regulations.

Can ESG Disclosure Stimulate Corporations’ Sustainable Green Innovation Efforts? Evidence from China

The Environmental, Social, and Governance (ESG) Composite Rating denotes corporations’ capability for supporting sustainable development activities, social responsibility, and transparent and ethical governance. It aims to inform investors and stakeholders about the company’s sustainability and social responsibility risks. ESG has increasingly become an informal yet significant driving force in promoting sustainable green innovation within the diversified co-governance environmental management system. This paper examines the dynamic relationship between ESG performance and sustainable green innovation practices in Chinese A-share listed companies from 2011 to 2022. The results show a positive correlation between ESG performance and the level of corporate sustainable green innovation. They also validate the moderating roles of informal external pressure and internal development demands. While the moderating effect of public environmental concern (PEC) is not significant, corporate digital transformation (CDT) significantly and positively moderates the relationship between ESG performance and sustainable green innovation. These findings offer policymakers and corporations a means to formulate a framework to shape the conduct of corporations to meet the market’s green development needs and to establish instruments that promote green innovation.

The Impact of ESG Disclosures on Financial Performance: Evidence from ASEAN-Listed Companies

With increasing global emphasis on sustainability, corporate transparency in ESG practices has become a critical factor for investors and stakeholders. This study investigates the impact of Environmental, Social, and Governance (ESG) disclosures on the financial performance of listed companies in ASEAN countries. This research employs a dynamic Generalized Method of Moments (GMM) approach to address endogeneity concerns and assess the relationship between ESG disclosure and financial performance indicators such as return on assets (ROA), return on equity (ROE), and market value. Using panel data from ASEAN-listed firms over the period 2013-2022, the findings show that firms with strong historical performance tend to maintain profitability, while ESG disclosures positively influence financial outcomes by enhancing investor confidence and risk management. Larger firms benefit from economies of scale, while excessive leverage reduces profitability. Favorable macroeconomic conditions, such as GDP growth, also play a crucial role in boosting firm profitability. Policymakers should mandate ESG disclosure frameworks, incentivize sustainable practices, and provide financial support to smaller firms. Promoting responsible debt management and ensuring macroeconomic stability through favorable trade policies will also enhance firm profitability and long-term economic growth.

The compounding effect of mandatory GHG emissions disclosure and voluntary ESG disclosure on firm value in Korea

PurposeThis study attempts to examine the effect of greenhouse gas (GHG) emissions disclosure and its compounding effect with environmental, social, and governance (ESG) disclosure on firm value in Korea. This study focuses on the unique institutional setting in Korea that implements mandatory GHG emissions disclosure and voluntary ESG disclosure.Design/methodology/approachUsing a dataset comprising 25,968 firm-year observations from publicly listed Korean firms from 2000 to 2021, we applied an ordinary least squares (OLS) regression model to test hypotheses.FindingsThe results show that, in a voluntary disclosure regime, ESG disclosure has a positive impact, whereas in a mandatory disclosure regime, GHG emissions disclosure has a negative impact on firm value. The results also indicate that when a firm discloses both its GHG emissions and ESG performance information, the voluntary disclosure of ESG information synergistically mitigates the adverse effects of mandatory disclosure of GHG emissions information. This synergy contributes significantly to enhancing the firm’s overall value. The findings indicate that a firm can enhance its value by proactively disclosing ESG information, especially when it is compulsorily required to report GHG emissions data.Originality/valueThis study investigated the effect of corporate non-financial disclosure on firm value by shedding light on the differential attributes between voluntary and mandatory disclosures and between quantitative and qualitative information.

The Relationship Between ESG Disclosure and Corporate Performance

Abstract: As the economy continues to develop and the focus on sustainable development increases, low-carbon environmental protection has become an indispensable aspect for businesses. In this context, the concept of ESG and its measurement has become a major direction for the international community to assess investment behaviors and targets. However, questions such as what exactly ESG is, how significantly it impacts businesses, and how businesses should respond, need to be studied. This paper discusses these issues from the perspective of ESG information disclosure and corporate performance, outlines the impact pathways of ESG disclosure on businesses, and suggests reasonable responses and measures.

Research Dynamics and Frontiers of Environmental, Social, and Governance Disclosure: Bibliometric Visual Analysis Based on CiteSpace

Abstract: With the increasing global attention on sustainable development and corporate social responsibility, studying the dynamics and frontiers of Environmental, Social, and Governance (ESG) disclosure is of great significance to academia, corporate practice, and policy-making. This study employs CiteSpace for bibliometric visual analysis, utilizing methods such as keyword co-occurrence analysis, cluster analysis, and research theme evolution analysis to comparatively analyze the differences in ESG research between domestic and international contexts. The study reveals the hotspots, trends, and development directions of ESG disclosure research. The findings indicate a steady growth in the number of publications in the ESG disclosure research field, with research themes shifting from singular environmental information disclosure to a more comprehensive focus on social responsibility and governance structures. This study not only provides researchers with new perspectives, expanding and deepening the themes of ESG research, but also offers references for companies to enhance ESG disclosure and for policy-making, thus holding significant theoretical and practical implications.

How Do Institutional Investors Perceive Mandatory ESG Disclosure: Evidence From SEC’s Mandatory Climate Change Disclosure Proposal

This study examines how institutional investors perceive the SEC’s mandatory climate change disclosure proposal, announced on March 21, 2022. The findings show that investors of US public firms with higher institutional ownership react less negatively to the proposal despite overall negative market reactions. Additional tests show that the main results hold even if an endogeneity concern and greenhouse gas contributors’ effect were tested with the cross-sectional regression models. This research sheds light on the lack of consensus on the impact of institutional investors on ESG disclosure for US public firms, providing evidence that institutional investors contribute to the long-term sustainability and value creation of portfolio firms.

Construction of ESG Performance and Corporate Competitive Advantage: A Case Study of Poly Development Holding Group Co., Ltd.

In recent years, the attention to Environmental, Social, and Governance (ESG) issues has been increasing, accompanied by the enrichment and improvement of related policy systems. The advantages brought to enterprises by corresponding ESG policies have gradually become evident. Therefore, this paper takes the development of Poly Development Group from 2021 to 2023 as a sample to study the advantages that enterprises have gained in response to ESG-related policies. Through the analysis of existing data, it is found that the advantages established by ESG for enterprises mainly include: (1) enhancing corporate economic benefits, (2) reducing corporate operating risks, and (3) promoting corporate innovation and development. Based on these findings, it is proposed to accelerate the improvement of the ESG-related policy system, increase the attention of enterprises to ESG performance and disclosure, and contribute to the construction of a favorable development ecosystem for both academia and industry, thereby effectively improving production and development efficiency.

The Relationship Between Corporate ESG Disclosure and the Chinese-style Modernization

Against the backdrop of contemporary Chinese-style modernization, the state has placed increasing demands on enterprises to adhere to the principles of Environmental (E), Social (S), and Governance (G). Consequently, enterprises will face more challenges and transformations. This paper employs a multi-case study method, focusing on the sample data of Wahaha Group and Ant Group. Based on Wahaha Group's 2020 Social Responsibility Report and Ant Group's 2022 Sustainable Development Report, the paper analyzes the impact and role of corporate ESG disclosure on Chinese-style modernization from the perspectives of people-oriented, shared prosperity, and green development. The paper argues that Wahaha Group and Ant Group fully embody the new development concept of "coordination, greenness, and sharing" in their disclosure of ESG information, which has a close relationship with "Chinese-style modernization" and holds significant importance in contemporary China.

Greenwashing practices and ESG reporting: an international review

PurposeThis study provides an overview of the numerous theoretical facets of greenwashing (GW) and their relationship with sustainability, social responsibility and sustainable development. This study highlights the actions of governments and international organizations in GW. It delves into the sins of GW and the various metrics used in the literature to measure them. It seeks to distinguish between sustainability reporting and GW practices by offering a critical perspective on GW.Design/methodology/approachThis study measures GW practices at the international level and compares them with the ESG disclosure score. The main determinants of GW are assessed by examining the impact of a set of variables on GW. The influence of various sources used to gather the data were assessed using multiple regression analysis.FindingsFactors such as protocols and conventions, media role and the strength of environmental policies have a considerable and positive impact on the occurrence of GW.Research limitations/implicationsOwing to the research method chosen for measuring variables such as GW scores, procedures for measuring GW in companies should be developed. Multicriteria modeling could be a suitable approach to address the sorting or portfolio approach.Originality/valueThis study provides a theoretical basis for examining GW from a business-economic standpoint. It presents various perspectives on GW, analyzes relevant theories and explores potential GW strategies. This study highlights the connection between GW and various factors, including the influence of conventions, role of the media and strength of environmental policies.

The Role of Leverage in Moderating ESG Disclosure and Financial Slack on the Company's Financial Performance

The purpose of this study is to determine the effect of ESG Disclosure and financial slack on the Company's financial performance by using leverage as a moderating variable. The emergence of issues related to the environment, social, and governance of company operations in Indonesia raises concern and responsibility to the community in the form of sustainability reporting. ESG disclosure provides a more complete picture of the sustainability aspects of company performance that supports regulatory reporting in Indonesia which provides an overview of how the company performs financially in a certain period. This research uses a quantitative approach with an explanatory method. The sample of this study is a mining company listed on the IDX for the period 2020-2022. The sampling method used was purposive sampling, with a total sample size of 50 companies and a total observation data of 150. Data analysis using moderated regression analysis (MRA). The results showed that the financial slack variable had a significant effect on the company's financial performance and leverage was able to negatively moderate the influence of the financial slack variable on the company's financial performance. In contrast, ESG disclosure had no significant effect on the company's financial performance and leverage was unable to moderate the influence of the ESG disclosure variable on the company's financial performance.