ESG Disclosure Research Articles

Moderating role of ESG disclosures and its impact on firm financial performance

This study examines the relationship between environmental, social, and corporate disclosures and its affects on financial position of the firm. The study is based on India’s listed companies which disclosed the ESG variable over the last decade. We examine the five measures of financial performance and firm ESG disclosures. In addition to financial performance measures as response variables, this study uses of Piotroski F scores as a proxy for financial position is unique and novel approach in sustainable finance research. The results show the social disclosures have positive significant affect on firm financial position. Firm value, valuation of the stock and cost of capital. The study will help regulators to strengthen the ESG disclosures and for investors it gives insight about the relationship between ESG disclosure and financial performance of a firms.

News or noise? ESG disclosure and stock price synchronicity

Environmental, social, and governance (ESG), as an important mechanism to promote the sustainable development of the capital market, is bound to have a significant impact on its stock price synchronicity. This paper examines the impact and mechanism of corporate ESG disclosure on stock price synchronicity using data from Chinese A-share listed companies from 2013 to 2022. It analyzes the dual perspectives of information efficiency and noise trading. The findings support the noise trading perspective, as ESG disclosure significantly reduces the impact of noise on stock prices and enhances firms' stock price synchronicity, and the conclusions still hold after a series of endogeneity and robustness tests. It is also found that the positive impact of ESG disclosure on stock price synchronicity is mainly realized through the paths of reducing accrual earnings management and increasing analyst attention. Moreover, the positive impact of ESG disclosure on stock price synchronicity is more significant in the group of non-state-owned enterprises, higher quality of internal control, non-polluting industries, and less market-oriented enterprises. The study in this paper not only enriches the related literature in the field of ESG disclosure and stock price synchronicity but also reaffirms the noise trading theory of the irrational school.

Does ESG disclosure enhance firm performance during COVID-19? Evidence from Nifty 500 firms

Market turmoil caused by COVID-19 has weakened firms’ financial performance, highlighting the prominence of sustainable business practices by incorporating Environmental, Social, and Governance performance and their disclosure. Though past studies investigated COVID-19’s impact on firm performance, there is consensus on the role of firms’ Environmental, Social, and Governance disclosures between firm performance and the pandemic. With this view, the study aims to examine the impact of COVID-19 on firms’ financial performance with the moderating role of Environmental, Social, and Governance performance disclosure. To do so, the study retrieved data of Nifty 500 index companies from the Bloomberg database for a sample period ranging from 2016 to 2022. To this end, the study performed the fixed-effect regression and GMM model. The findings reveal a significant negative impact of the pandemic on Return on Assets (β =-4.812), Return on Equity (β =–.675), and Earnings Per Share (β = –2.875), highlighting the unfavorable effect of the pandemic on firm performance. Further results showed that firms’ Environmental, Social, and Governance performance disclosure positively moderates the connection between COVID-19 and Return on Assets (β = 3.231), Return on Equity (β = 0.032), and Earnings Per Share (β = 1.523), respectively. This indicates that companies actively involved in Environmental, Social, and Governance disclosure are less likely to suffer during the pandemic in terms of financial performance due to their ESG disclosures.

Pacific accounting review in 2013–2023: a bibliometric analysis

PurposeThis literature review aims to portray the thematic landscape of the Pacific Accounting Review (PAR) from 2013 to 2023. This paper also synthesises the special issues in PAR and identifies the main research streams that facilitate contemplating the dialogic interactions between PAR and real-world challenges. Furthermore, this paper aligns these streams with the emerging concerns in Sustainable Development Goals (SDGs) and technological disruptions to propose impactful future directions for publications in PAR.Design/methodology/approachThis review adopts bibliometric analysis to establish the main research streams and objective measures for directing future publications. This paper acquires the data of 310 PAR articles from the Web of Science and ensure the data integrity before the analysis. Based on this technique, this paper also analyses PAR’s productivity, authorship and local and global impacts.FindingsOur bibliometric analysis reveals three key research streams: (1) ESG practices and disclosures, (2) informal institutions in accounting and (3) accounting in transition. This finding affirms PAR’s relevance to real-world accounting challenges. Using a thematic map, this paper portrays the current state of PAR’s topics to identify potential directions for future publications. Further, this paper proposes three future paths for PAR: (1) the research agenda for non-financial reporting, (2) research relating to and from diverse countries considering both formal and informal contemporary contextual factors and (3) the future of the evolving accounting profession.Originality/valueThis study adds value to the existing PAR reviews by extending our knowledge with the latest publications, demonstrating an objective and replicable approach, and offering future directions for PAR publications.

The Impact of ESG Disclosure on Firm Value Relevance: Moderating Effect of Competitive Advantage

The Impact of ESG Disclosure on Firm Value Relevance: Moderating Effect of Competitive Advantage

Corporate Bond Market Reaction to the Mandatory ESG Disclosure Act: Is Sustainium Sustainable?*

AbstractWe investigate the primary and secondary market reactions of US corporate bonds to the mandatory Environmental, Social, and Governance (ESG) Disclosure Act of 2021 (hereafter, the ESG Disclosure Act). We compare ESG bonds with non‐ESG bonds through a yield spread analysis for the primary market and a bond event study for the secondary market, assessing the impact on a sustainable premium (“sustainium”) following the enactment. Sustainium disappears from the primary market after the ESG Disclosure Act. Abnormal corporate bond returns in the secondary market are negative, and the impact on the sustainium is not economically different from zero. We also find that long‐term corporate bonds are more vulnerable to the ESG Disclosure Act. These findings indicate that investors should assess ESG bonds according to long‐term horizons if the sustainium is expected to persist.

The Effect of Financial Constraints and Political Connections on Tax Aggressiveness with ESG Disclosure as a Moderating Variable

The Effect of Financial Constraints and Political Connections on Tax Aggressiveness with ESG Disclosure as a Moderating Variable

Greenwashing in the Indian corporate landscape: an empirical assessment of ESG disclosures of NIFTY 50 companies

Greenwashing in the Indian corporate landscape: an empirical assessment of ESG disclosures of NIFTY 50 companies

ESG Disclosure by Brazilian Public Companies

Objective: The objective of this study is to investigate ESG disclosure by Brazilian publics companies with the aim to understand issues regarding the standards used by companies, main risks reported, the auditing companies, emission of greenhouse gases etc. Theoretical Framework: In 2021, the Brazilian Securities and Exchange Commission (CVM) issued Resolution No. 59 requiring listed companies to disclose ESG information in their Reference Form in the model of “disclose or explain”. This new regulation makes Brazil an excellent laboratory to investigate the disclosure of sustainability informations. Method: A metric was developed, based on CVM Resolution No. 59/21, which deals with ESG disclosures in the Reference Form. The disclosures made in the financial year 2022 were analyzed using the content analysis technique. The study sample consisted of the 81 companies that made up the Ibovespa portfolio in the period September-December 2023. Results and Discussion: (i) 78 companies published reports with sustainability information; (ii) the GRI was the most widely used disclosure standard; (iii) about 74% of the disclosures had a Limited Assurance Report from an independent firm, mostly one of the “Big 4” companies; (iv) 78 companies used the UN SDGs in their reports; (v) 51 companies took into account the TCFD recommendations in their climate-related disclosures; (vi) 67 companies carried out a full GHG emissions inventory. Research Implications: There is a need to improve disclosures, focusing on the information needs of shareholders and creditors, and that the requirement for reasonable assurance will tend to require improvements in sustainability-related practices and policies, as well as in internal controls. Originality/Value: ESG disclosure is growing around the word as sustainability issues became more important to investors around de world. Brazil is home to the world’s largest environmental asset, the Amazon rainforest, and has already developed a number of sustainable finance initiatives. In fact, the country is poised to become a global leader in the corporate sustainability movement. In the sense this study wishes to contribute to existing literature on the topic as well as practitioners and regulators.

Can semi-mandatory non-financial disclosure requirements drive firms to improve ESG performance - evidence from Chinese listed companies

This study aims to reveal the impact of semi-mandatory non-financial disclosure requirements on corporate ESG performance and its mechanism. Utilizing the “comply or explain” semi-mandatory ESG disclosure requirement implemented by the Hong Kong Exchanges and Clearing Limited (HKEx) of China in 2016 as a quasi-experiment, and adopting the difference-in-differences identification strategy, this paper finds that semi-mandatory non-financial disclosure requirements can significantly enhance corporate ESG performance. Through mechanism analysis, it is found that semi-mandatory non-financial disclosure requirement promotes firms' ESG performance by suppressing the myopic behavior of corporate management and improving the quality of corporate internal control. Through heterogeneity analysis, it is found that semi-mandatory non-financial disclosure requirements have a greater effect on the ESG performance of firms with high institutional investor attention and non-polluting firms, and a smaller effect on firms with executives with overseas experience.

Really Want a Whole? Or Take It Apart? Evidence of ESG disclosure heterogeneity on Chinese Listed Firm

Purpose: We examined how ESG disclosure and its sub-dimensions impact holding period returns, profitability, and company value. Design/methodology/approach: Utilizing Bloomberg panel data, the research investigates the effects of ESG dis-closures and their sub-dimensions on financial metrics within the Chinese stock market. Findings: Results reveal a multifaceted impact of ESG disclosures: environmental aspects positively affect returns, governance has a negative impact, and social factors show no significant effect. Overall ESG disclosures enhance Tobin's q, particularly driven by environmental factors. The study also identifies industry specific ESG effects and confirms ESG disclosure as a precursor to firm value, addressing endogeneity concerns. Research limitations/implications: The study offers vital insights for investors, guiding them on the differential impacts of ESG components on returns in China. It informs policymakers on crafting nuanced ESG disclosure regulations and encourages researchers to further explore ESG effects across industries and markets. Originality/value: This research uniquely dissects the disparate impacts of ESG dimensions on firm performance, emphasizing environmental disclosures and industry heterogeneity, especially during the COVID-19 pandemic. It advances the literature by detailing how various ESG facets affect firm performance, aiding stakeholders in aligning sustainability strategies with market expectations.

Analysis of ESG Disclosure Practices in Healthcare Sector Companies

This study aims to describe the disclosure of ESG, environmental, social, and governance dimension practices in healthcare sector companies listed on the Indonesian Stock Exchange from 2021 to 2022. This research used a descriptive study to describe ESG disclosure in healthcare companies. The research objects are 28 healthcare sector companies listed on the Indonesian Stock Exchange from 2021 to 2022. The result shows that the ESG disclosure in Indonesian healthcare sector companies based on the GRI Standard needs to be higher and more informative. In the environmental aspect, the average quantity of ESG disclosure is 38.65%, while the quality of disclosure is 31.94%. In the social aspect, the average amount of ESG disclosure is 43.47%, while the quality of disclosure is 31.10%. In the governance aspect, the average quantity of ESG disclosure is 53.82%, while the quality of disclosure is 37.78%.

Unveiling the Complexities of ESG and CSR Disclosures Determinants: A Systematic Literature Review

The intensifying focus on environmental, social, and governance (ESG) and corporate social responsibility (CSR) in recent years has attracted substantial scholarly interest in investigating the determinants of these disclosure practices. While notable similarities between ESG and CSR were found, the somewhat murky relationship between the two has introduced significant ambiguities into the academic discourse. To address this issue, this study performed a systematic review of 164 articles sourced from the Web of Science and Scopus databases, indicating post-2018 articles to constitute 70% and 81% concentrating on the extent of disclosures. The literature revealed substantial similarities in the theoretical frameworks and discovered determinants, but exposed considerable confusion concerning the definitions and proxies used for CSR disclosures which future research can address. The study offers insightful clarity to the burgeoning knowledge of ESG and CSR, benefiting both academicians and practitioners.

From home to boardroom: Marital status and its influence on ESG disclosure

AbstractThis research article investigates the relationship between the marital status of board members and organizations' environmental, social, and governance (ESG) disclosure, with Jordan as the study context. The investigation, grounded in established governance theories, primarily agency theory, stewardship theory, and social identity theory, adds a novel dimension to the discourse on corporate governance perspective. The study sample included 81 nonfinancial companies listed on the Amman stoke exchange from 2012 to 2021. The findings disclose a pronounced positive relationship between married board members and ESG disclosure separately and collectively, pointing to a normative commitment emanating from their personal lives that extends into their roles as corporate stewards, influencing corporate sustainability, and ethical governance. Conversely, the results did not indicate a relationship between single board members and ESG disclosure. The study underscores the importance of considering the personal attributes of board members in shaping corporate governance and ESG practices. Also, it encourages a broader perspective on how diverse personal backgrounds can enhance sustainability and ethical values within organizations by advocating for boards that reflect diverse marital statuses and a commitment to family values, benefitting not only shareholders but also society at large.

Do pilot zones for green finance reform and innovation avoid ESG greenwashing? Evidence from China

As ESG investments have grown, many companies are emphasizing them to impress capital markets and consumers with their responsibility and environmental consciousness. However, managers in unethical companies greenwashing ESG reports to keep clients. The present investigation employs quasi-natural experiment data obtained from a sample of 1200 Chinese A-share listed companies spanning the period from 2011 to 2021 to examine how the Green Finance Reform and Innovation Pilot Zone (GFRIPZ) affects ESG greenwashing. GFRIPZ can prevent publicly traded companies from ESG greenwashing. The statistical analysis of heterogeneity demonstrates that GFRIPZ in non-state-owned, mid-west, heavy-polluting, manufacturing industries reduces ESG greenwashing. GFRIPZ suppresses corporate ESG greenwashing better in companies with severe financial constraints and a poor corporate reputation. GFRIPZ's inhibition of corporate ESG greenwashing is enhanced by internal and external monitoring. This study shows how financial markets affect firms' ESG greenwashing. It helps implement GFRIPZ theoretically. It also recommends raising listed companies' awareness of ESG disclosure and reducing corporate ESG greenwashing.

Impact of ESG disclosure on financial performance with leverage as an intervening variable in mining companies listed on the Indonesia Stock Exchange

impact of ESG disclosure on financial performance with leverage as an intervening variable in mining companies listed on the Indonesia Stock Exchange

Sustainability Reporting and Market Uncertainty: The Moderating Effect of Carbon Disclosure

This research examines how ESG disclosure influences market uncertainty through carbon disclosure. It uses a 10-year dataset from 2012 to 2021 of non-financial U.K. companies in the FTSE All-Share index. This study employs four regression methods to scrutinize the interplay between ESG disclosure, carbon disclosure, and market uncertainty. The research findings uncover a notable reduction in market uncertainty associated with ESG disclosure, aligning with the Information Asymmetry Theory. Interestingly, this study also uncovers that carbon disclosure amplifies this negative relationship, a finding that resonates with the Signaling Theory. These results hold true across various measures of ESG and market uncertainty. This study enriches the sustainability reporting literature with implications for theory and practice. It extends Information Asymmetry and Signaling Theories to U.K. non-financial firms, emphasizing the need for more research on sustainability disclosure. It underscores the role of ESG and carbon disclosure in reducing cost of capital, enhancing firm value, and boosting investor confidence. It calls for transparent ESG reporting by managers, regulatory promotion of such disclosures, and stakeholder utilization of these to evaluate a firm’s impact and contribution to the SDGs, fostering collaboration on sustainability. This study offers key insights for stakeholders such as managers, investors, regulators, researchers, policy makers, and educators in the realm of sustainability reporting and market dynamics.

ESG performance and corporate technology innovation: Evidence from China

With the concept of sustainable development and innovation-driven development strategy proposed in China, as well as the promotion of the concept of ESG, which takes into account both economic and social benefits, it is of great theoretical and practical significance to study how ESG empowers both internal management and external investors, and ultimately enhances corporate technological innovation (CTI). This paper takes Chinese A-share listed companies from 2010 to 2021 as the research object, and tries to study the impact of ESG performance on CTI and its mechanism based on the perspective of innovation process. It is found that: (1) ESG performance can effectively promote the intensity of R&D investment, innovation output and quality of enterprises, and this conclusion still holds after a series of robustness tests. (2) The innovation incentive effect of ESG performance is more obvious in enterprises in traditional industries, manufacturing industries and heavy pollution industries; (3) ESG performance mainly affects CTI through alleviating enterprise financing constraints, improving enterprise market expectations and gathering high-end research talents. The above findings have important implications for optimizing corporate ESG disclosure mechanisms and promoting CTI through process optimization.

Sustainable Innovation and Economic Resilience: Deciphering ESG Ratings’ Role in Lowering Debt Financing Costs

AbstractThis study delves into the intricate dynamics between environmental, social, and governance (ESG) ratings and corporate debt financing costs among China’s A-share listed companies from 2010 to 2021. Analyzing a substantial dataset unveils a tangible link where higher ESG ratings correlate with significantly lower debt financing costs. This relationship manifests more prominently in enterprises with lower pollution levels, state ownership, and those in China’s central and western regions, especially under heightened economic policy uncertainty. The findings elucidate that improved ESG ratings, reflective of robust sustainability practices, diminish corporate agency costs and enhance financial stability, thereby reducing debt financing expenses. This research extends the discourse in the knowledge economy by offering empirical evidence on how ESG integration can serve as a lever for financial efficiency and sustainability in business operations. By spotlighting the financial merits of embracing ESG criteria, the study offers profound insights for policymakers, investors, and corporations, encouraging the acceleration of ESG disclosure and assessment frameworks. In doing so, it supports the cultivation of high-caliber, environmentally friendly enterprises, aligning with the broader objectives of innovation, entrepreneurship, and societal welfare within the knowledge economy paradigm.

Integration of green finance with ESG compliance to enhance the firm value. Managerial approach to determining the level of liquidity

The purpose of this study is to reveal the integration of green finance with environmental, social, and governance (ESG) compliance in firm liquidity. We also explore the non-financial channels like social capital and green innovation through which ESG compliance influences the firm’s liquidity. The study employs two-stage Least Squares (2SLS) and Generalized Method of Movements (GMM) regression analysis to address the endogeneity issues. The results obtained through 2SLS and GMM regression analysis indicate that firms engagement in green finance and ESG compliance help them keep their liquidity low. The findings indicate that firms operating in high-ESG regions have lower liquidity than firms operating in low-ESG regions. Green finance plays an essential role in designing the firm’s long-term strategy to promote sustainable development and address climate change. Green finance helps mobilize funds for sustainable environmental projects and reduces the risk of green investment. It may also improve the firm’s performance and reduce financial constraints. The government should introduce the clear legislation, incentives, and standards to promote the green finance for sustainable investment. The private sector can implement the green finance practices by integrating ESG disclosures with firm investment decisions, and innovation processes. This research study contributes to the existing corporate literature by analyzing the integration of ESG disclosures with green finance in the presence of social capital and green innovation in firm liquidity.