ESG Disclosure Research Articles

Research on the Impact of ESG Disclosure on Green Bond Issuance in New Energy from the Perspective of Carbon peak

With the goal of carbon peaking, low-carbon green development has become the main theme of economic development. In this context, while pursuing economic benefits, it is also necessary to take into account environmental benefits. Industrial development policies and matching funding strategies related to low-carbon green are called for, and sustainable economic strategies will make the industry move forward steadily. On the basis of foreign scholars' research on green bonds and industrial ESG, this project is based on the new energy industry, organizing and researching the information disclosed by its ESG, exploring in depth the influence of this information on the issuance of green bonds by the new energy industry, and exploring whether there is any positivity in this influence. The ESG information disclosed by the new energy industry can, on the one hand, help investors better understand ESG governance and the green bond market in the new energy industry, and guide them to make rational investments; on the other hand, it can help the government better formulate policies to improve the perfection of the green bond-related standards, including the evaluation system and certification system, as well as the quality of the industry's information disclosure.

The Effects of Mandatory ESG Disclosure Around the World

ABSTRACTWe compile a novel data set on mandatory environmental, social, and governance (ESG) disclosure around the world to analyze the stock liquidity effects of such disclosure mandates. We document a positive effect of ESG disclosure mandates on firm‐level stock liquidity. The effects are strongest if the disclosure requirements are implemented by government institutions, not on a comply‐or‐explain basis, and coupled with strong enforcement by informal institutions. Firms with weaker information environments benefit more from ESG disclosure mandates. Our results support the view that ESG disclosure regulation improves the information environment and has beneficial capital market effects.

Can stakeholders evaluate corporate ESG performance through its ESG disclosure? A study of Thai listed firms

Can stakeholders evaluate corporate ESG performance through its ESG disclosure? A study of Thai listed firms

Enhancing Value: The Impact of Environmental, Social, and Governance Disclosure on Indonesian Basic Materials Sector Companies

Abstract Purpose - This study aims to determine the effect of the implementation of environmental, social and governance disclosure on firm value in the basic materials sector listed on the Indonesia Stock Exchange (IDX) during the 2018-2022 period. Design/methodology/approach - This research uses quantitative methods using secondary data that has been published on the company’s official website and the official IDX website. The population in this study are basic materials sector companies listed on the IDX in 2018-2022. The samples in this study were 11 companies for five years of observation so that 55 data samples were obtained. The sampling technique used purposive sampling technique. The data analysis techniques used in the study are classical assumption test analysis, multiple linear regression test, correlation test, determination test, t test and f test using IBM SPSS 26 software. Findings - The results showed that environmental disclosure has a positive influence on firm value, but social disclosure and governance disclosure do not show the same positive influence on firm value.Research limitations/implications - The limited data set may not fully encapsulate the diverse impacts of ESG disclosures on firm value, thus impacting the robustness and generalizability of the study’s conclusions. Keywords: Environmental Disclosure, Social Disclosure, Governance Disclosure, and Firm Value

Mandatory ESG disclosure, information asymmetry, and litigation risk: Evidence from initial public offerings

AbstractI use the staggered adoption of mandatory environmental, social, and governance (ESG) disclosure regulations around the world to explore the impact of ESG disclosure on initial public offering (IPO) underpricing. I find robust evidence that underpricing is substantially lower in countries with ESG disclosure mandates. High‐quality disclosure environments moderate and tougher liability standards amplify the negative association between ESG disclosure mandates and underpricing, which suggests that ESG disclosure mandates reduce information asymmetry and litigation risk. The impact of ESG disclosure mandates on underpricing is stronger in countries with more pronounced environmental, social, and governance concerns.

Financial constraints of ASEAN firms: Impact alleviation by ESG pillars

The purpose of this study is to examine whether ESG plays a positive moderating role in the negative relationship between financial constraint, the Kaplan-Zingales (KZ) and Whited and Wu (WW) indexes, and firm performance: Return of Asset (ROA) and Return of Equity (ROE). This study uses information from the Thomas Refinitiv database, which covers the Association of Southeast Asian Nations (ASEAN-5): Indonesia, Malaysia, Singapore, Thailand, and the Philippines non-financial firms from 2011 to 2019. Fixed-effects (FE) are used as the baseline model, and random-effects (RE) act as the robustness of methods. The results show that the main effect of financial constraints is to act as an obstacle to firm performance. However, the marginal effects of financial constraints can be improved in the presence of ESG. Firms with a high ESG score are better at alleviating the adverse impact of financial constraints as compared to those with a low ESG score. When the ESG score is further broken down into three sub-pillar dimensions, the S-score is of the greatest magnitude in its moderating role in the ESG breakdown. The findings have important implications: effective financial support and the source of funding from the government are crucial to supporting firm performance. ESG-compliant strategies should also be formulated to encourage ESG disclosure, which leads to increased capital allocation efficiency. The firms should be stringent on S-score, which helps drive the company as employees respond by giving their best. Governments and firms need to deploy ESG guidelines in order to succeed in thriving competitive firm performances.

Institutional investor stewardship and material sustainability information: Evidence from Taiwan

Institutional investors generally promote better sustainability disclosure and performance quality, which emphasize environment, social, and governance (ESG) development. Utilizing the SASB standards that improve the financial materiality of sustainability information, we find that institutional investors in Taiwan foster both material and immaterial ESG disclosure and performance. Thus, institutional investors seem to target the common good and follow the stewardship code instead of focusing only on ESG performance that closely relates to firm value. Our findings are driven by domestic rather than foreign institutional investors, suggesting that domestic institutions enjoy some information advantage and therefore drive ESG improvements more efficiently.

Diversity Washing

ABSTRACTWe provide large‐sample evidence on whether U.S. publicly traded corporations use voluntary disclosures about their commitments to employee diversity opportunistically. We document significant discrepancies between companies' external stances on diversity, equity, and inclusion (DEI) and their hiring practices. Firms that discuss DEI excessively relative to their actual employee gender and racial diversity (“diversity washers”) obtain superior scores from environmental, social, and governance (ESG) rating organizations and attract more investment from institutional investors with an ESG focus. These outcomes occur even though diversity‐washing firms are more likely to incur discrimination violations and have negative human‐capital‐related news events. Our study provides evidence consistent with growing allegations of misleading statements from firms about their DEI initiatives and highlights the potential consequences of selective ESG disclosures.

Are green and healthy building labels counterproductive in emerging markets? An examination of office rental contracts in India

Financial prudence compels businesses to improve their Environmental, Social, and Governance (ESG) performance when the marginal benefits, pecuniary or non-pecuniary, exceed the marginal costs. For many firms, renting green offices is a feasible ESG activity which may increase their willingness to pay higher rents. Analyzing over 17,000 green rental contracts in India between 2010 and 2022, we find that rents in green-labeled assets and those with health certification command significant premiums between 4 and 21%. However, green rents increased much faster compared to their non-green counterparts, and the propensity to rent green varies significantly across industry segments. We further examine how the market for green offices evolved after a mandatory ESG Disclosure Requirement was enacted in India in 2021. We find that suppliers (landlords) benefited from the regulation by disproportionately increasing rental rates. Existing tenants and foreign firms ended up paying higher rental prices while most other firms, including the assumed target groups of the new policy, redirected their green commitment away from green buildings. Although the policy may yield more positive results in the longer run, a reduced propensity to rent green offices is the opposite of what the ESG Disclosure Requirement tried to achieve.

Impact of ESG Disclosure Score on Firm Value: Empirical Evidence From ESG Listed Company in Indonesia Stock Exchange

The trend in ESG investment was responded to by the Indonesia Stock Exchange, which released four ESG indexes. ESG indexes consist of the companies that have a better concern in ESG. Each ESG index has its positive or negative performance compared to the combined stock index. This research aims to determine the impact of ESG Disclosure on firm value. The sample of this research covers 55 companies that have been listed in the ESG index in the 2017–2021 period. The data is collected from the Bloomberg database and processed with a panel data regression model using Stata 17. The finding of this research is that there is a positive but no significant impact between the ESG Disclosure Score and firm value. This finding will contribute to the previous study about the disclosure information of non-financial information and its impact on the firm’s value in the market.

Data assets and corporate sustainable development: evidence from ESG in China

This paper studies the impact of data assets generated inside firms on their Environmental, Social, and Governance (ESG) performance. Using a sample of listed firms in China from 2010 to 2020, we find that firms that use data assets have better ESG performance. Further analyses show that data assets improve ESG performance by enhancing operational capacity and improving monitoring. Furthermore, the impact of data assets on ESG performance is more pronounced for firms with lower asset turnover rates, weaker market power, and higher agency costs, and in scenarios where mandatory ESG disclosure is absent and CEOs have IT-related backgrounds. This paper enriches the literature by shedding light on the role of data assets in sustainable development and corporate social value creation and has practical implications for data governance in the digital era.

Does ESG help reduce the goodwill impairment?—From perspectives of information increment and information manipulation

An increase in mergers and acquisitions (M&A) leads to a significant increase in the total amount of goodwill in the capital market. However, from time to time, significant goodwill impairment has occurred due to less-than-expected M&A performance. Based on the data of Chinese A-share listed companies from 2011 to 2022, this paper examines the relationship between ESG and goodwill impairment. The findings suggest that ESG performance can provide stakeholders with incremental information, which, in turn, reduces the magnitude of goodwill impairment. However, the resources occupied by the fulfilment of ESG responsibilities crowd out the resources for M&A integration, affecting M&A performance, thereby increasing the possibility of goodwill impairment. In other words, the impact of ESG on goodwill impairment is a balance between positive and negative effects. We also find that the manipulation of ESG disclosures could be an approach to earnings management.

Oversight Mechanisms and the Reduction of Greenwashing

Purpose: This study aimed to identify oversight mechanisms that reduce greenwashing behavior. Method: Data come from Bloomberg and Refinitiv ESG scores of 88 Brazilian public companies listed on the Brazilian stock exchange B3 from 2010 to 2021. The estimation method was the FGLS (Feasible Generalized Least Squares). Result and Discussion: The results suggest the action of institutional investors, independent board members, and being an environmentally sensitive industry company can reduce greenwashing. However, a series of divergences in the results might indicate that the practice of greenwashing is due to unequal awareness and a developing regulatory framework. Research Implications: This study contributes to ESG policymakers, managers, and investors by exploiting oversight mechanisms to reduce greenwashing behavior and encourage companies' sustainable development. Originality/Value: ESG disclosure intentions and actions help stakeholders' decision-making process, especially investors, through sustainability reports. However, the unaudited content can be misleading by pointing out greenwashing behavior, which means what is said does not correspond to company actions. Such context is still to be intensely exploited, and that value to an extensive range of stakeholders.

Do ESG disclosures mitigate investors’ reaction on mining disasters? Evidence from Brazil

The purpose of this paper is to examine the investors´ reaction to the largest ecological disasters –Samarco (2015) and Brumadinho (2019)– occurred in Minas Gerais (Brazil). Applying a short-term event study analysis, we test the stock and Credit Default Swap (CDS) market´s on the mining sector. Moreover, a cross-sectional analysis is performed testing the effect of ESG disclosures on the market reaction –in terms of Cumulative Abnormal Returns, CAR– on the competitors of Vale S.A., the company involved in such ecological catastrophes. Our findings show a statistically significant reaction in both events. Investors´ react negatively and immediately in the case of Vale for both events; CARs are statistically significant for the shorter windows. However, investors react differently in the mining sector sample –excluding Vale–. While CARs are negative in Samarco, investors do so positively in the case of Brumadinho. In that sense, investors seemed as if they switch their perceptions from this first event –Samarco–in comparison to the most recent one –Brumadinho– rewarding the increase of ESG disclosures in the meantime and mitigating a negative contagion effect in the mining sector. The impact on the CDS market is also found positive in mining sector.

Dilemma of ESG Development: Investors Perspectives

Rising concerns around environmental and social issues have led to a heightened investor focus on the ESG performance of corporations. This attention underscores the increasing relevance of ESG considerations in the decision-making processes of investors. However, as ESG investments have risen in popularity, there has also been an increase in contradictory voices. The purpose of this article is to analyze the intricate landscape of ESG investments from the perspective of investors. It aims to shed light on the implications of corporate ESG responses and how investors incorporate ESG parameters into their investment portfolios. The study reveals specific challenges namely: (1) Corporations incurring short-term costs for making transformations affecting their stability, consequently leading to possible reductions in investors' short-term returns; (2) Corporations potentially misleading investors through greenwashing strategies to enhance their ESG portrayal; (3) Requiring investors to possess comprehensive industry knowledge when incorporating ESG in risk assessment thereby adding to time constraints; (4) Existing discrepancies in ESG disclosure standards leading to inconsistencies in ESG ratings given by different agencies; (5) Tracing corporate ESG performance being complicated by its strong links to both the size and financial performance of the corporation; (6) Incorporating ESG factors into investment portfolios could introduce tracking errors and potentially compromise portfolio diversification. Therefore, it is necessary to advocate stricter regulations around ESG disclosures, refining reporting standards to enhance transparency and comparability. Additionally, there is a call for further research to better comprehend the intricate relationship between ESG and financial performance.

Does voluntary environmental, social, and governance disclosure impact initial public offer withdrawal risk?

AbstractDespite much research now being published on Environmental, Social, and Governance (ESG) investments and Initial Public Offerings (IPOs) withdrawal risk, there appears to be a lack of evidence on the prospective IPO withdrawal risk associated with voluntary disclosure of ESG policies. This paper investigates the influence of ESG disclosure on IPO withdrawal by comparing voluntary ESG disclosure to conventional IPOs in the international market. A large data set is employed here, containing 33,535 failed and successful IPOs from 1995 to 2019 from several nations with their own legal systems, cultural norms, and economic systems. The findings reveal that voluntary disclosure of ESG practices does significantly reduce the likelihood of an IPO withdrawal, by as much as 48%. These findings strongly suggest that organizations engaged in ESG activities perceive voluntary disclosure as an incentive, to adhere to social expectations. Consequently, reducing the asymmetry of information between IPO participants minimizes the withdrawal risk these companies face, hence diminishing doubts about their legitimacy. The results have consequences for IPO businesses, investors, researchers, and regulators.

How do firms react to capital market liberalization? Evidence from ESG reporting greenwashing

AbstractBased on catering theory, this study employs a difference‐in‐differences model to investigate the impact of capital market liberalization on environmental, social, and governance (ESG) reporting greenwashing using mainland Hong Kong Connection Programs as a quasinatural experiment. Our findings indicate that corporate management increasingly engages in ESG reporting greenwashing in capital market liberalization to cater to foreign investors. This conclusion remains valid after controlling for endogeneity. Mechanistic analysis indicates that investor sentiment increases with capital market liberalization. In response, corporate management intensifies ESG reporting greenwashing to cater to foreign investors, and analysts' focus does not serve as a supervisory mechanism for restraining ESG reports greenwashing. Heterogeneity tests demonstrate that ESG reports greenwashing within the capital market diminishes for mandatory disclosure and state‐owned firms. However, ESG reports greenwashing intensifies among firms facing high financing constraints amid capital market liberalization. Overall, we identify a significant catering effect on ESG reporting amid capital market liberalization, offering a novel theoretical framework on greenwashing in ESG disclosures.

Imitation behavior in environmental, social, and governance disclosure: Textual analysis evidence from Chinese listed enterprises

AbstractThe era of sustainable transformation has witnessed an increase in corporate environmental, social, and governance (ESG) disclosure waves. Using Chinese A‐share listed companies from 2016 to 2021 as a sample, this study adopted textual analysis and machine‐learning techniques to analyze ESG reports and explore the imitation behavior of ESG disclosures in emerging Chinese markets for the first time. The results show imitation behavior exists in corporate ESG disclosures from the perspective of group association. Regarding the imitation object, enterprises tend to choose the peer average level as a reference rather than the best enterprise in the same industry, which reveals the inherent law that enterprises' ESG disclosures are satisfied with compliance rather than championship. In terms of effects, the ESG‐mimetic isomorphic pressure has no incremental information effect but has an efficiency optimization effect. Furthermore, the imitation intensity and impact effects of ESG disclosure behavior exhibit heterogeneity owing to differences in properties, sales growth rates, and external attention. This study expands the motivation for corporate ESG disclosure behavior and enriches the empirical evidence for institutional isomorphism.

ESG disclosure and corporate cost stickiness: Evidence from supply-chain relationships

We investigate the effect of Environmental, social, and governance (ESG) disclosures by customer firms on suppliers’ cost stickiness in a supply-chain setting. Our findings indicate that ESG disclosures can mitigate suppliers' cost stickiness, mainly due to reduced optimistic expectations from suppliers' management. Further analysis reveals that the negative relationship intensifies with increased geographical and social distance between suppliers and customers, and when they belong to different industries.

Walk well and talk well: Impact of the consistency of ESG performance and disclosure on firms’ stock price crash risk

The debate on whether it is possible for firms to do well by doing good in either ESG performance or disclosure is still ongoing. Investigating the consequences of firms’ outstanding status in both their actions and words may provide some new insights into this debate. This study investigates how the consistency of ESG performance and information disclosure affects the corporate stock price crash risk. We find that the consistency of ESG and its three separate dimensions negatively affects the corporate stock price crash risk. ESG consistency contributes to lower stock price crash risk through the mechanisms of alleviating agency problems and increasing information transparency. Moreover, this negative relationship is pronounced for firms operating in environmentally sensitive industries and provinces with greater public environmental attention.