ESG Disclosure Research Articles

ESG and Chinese corporate OFDI

In this era of sustainable development, ESG information disclosure and its capacity to fulfill goals have a significant influence on the outward foreign direct investment (OFDI) of Chinese firms. Using data from A-share listed businesses in Shanghai and Shenzhen from 2010 to 2020, this study empirically studies both the impact and mechanism of ESG information disclosure on corporate OFDI. According to the study, the greater a corporate's ESG rating, the more likely it is to engage in OFDI activities. Mechanism analysis shows ESG primarily supports corporate OFDI by easing financial limitations, lowering business risks, optimizing location choices, and strengthening reputation mechanisms. The heterogeneity study indicates this impact is stronger in large-scale firms, state-owned enterprises, and enterprises not subject to key supervision. Lastly, a further study indicates not only that ESG ambiguity reduces the promotion effect of ESG on corporate OFDI, but that high-quality disclosure also promotes OFDI more than purely symbolic low-quality ESG disclosure.

Reconsidering the impact of environmental, social and governance practices on firm profitability

PurposeThis paper investigates the relationship between commitment to ESG practices and firm performance using a synthetic index based on ESG disclosure and ESG performance scores.Design/methodology/approachUsing the Mazziotta-Pareto aggregation method, we develop a novel synthetic index of ESG engagement based on ESG rating and disclosure. This index is employed in a dynamic panel regression, implemented using the Arellano-Bond estimator, to explain profitability in a sample of 146 listed Canadian firms over the period spanning from 2014 to 2021.FindingsESG practices may either foster or hinder firm performance. In particular, a synergy emerges between the social and environmental dimensions of ESG practices, shedding light on the relevance of high standards in terms of environmental and social activities.Practical implicationsThe study emphasizes the significance of acknowledging the various facets of ESG engagement and the necessity of transcending the current constraints of accessible ESG data and ratings. Synthetic indices combining different types of ESG information may contribute to mitigating the problems created by strategic disclosure on the part of firms, which typically results in undesirable practices such as greenwashing and social washing.Originality/valueThis is the first study that applies the Mazziotta-Pareto method to develop a synthetic index of ESG engagement, tackling each pillar separately. Moreover, when investigating the effect of ESG engagement on profitability, we allow for cross-pillar synergies and/or trade-offs.

Do Diversity in Board Drive Environmental, Social and Governance Disclosure? ASEAN Banking Sector Evidence

The study examines the impact of board of director on Environmental, Social and Governance disclosure and each pillar (E,S,G) practice of ASEAN bank companies. The board diversity variabels such as age, tenure and gender were used. The sample consists of 58 companies listed in stock exchanges of each country for 2022 and panel data regressions is used for analysis. The study finds that the board diversity variabels age improve ESG disclosure and each pillar E S G. Variabel tenure dan gender tidak berpengaruh terhadap semua variabel dependen. This study is important due to following reasons, firstly ESG issues are important and global, the lack of ESG disclosure makes the increasing factors even more important. Secondly this study uses a more advanced Bloomberg ESG scores as well as individual environment, social and governance scores to measure the ESG disclosure and each pillar. Finally the research results support the Upper Echelons Theory that strategies to focus organizational efforts on specific areas such as ESG disclosure deployment originate and are reinforced by the organization's board.

Blockchain‐based incentive mechanism for environmental, social, and governance disclosure: A principal‐agent perspective

AbstractEnvironmental, social, and governance (ESG) disclosure has drawn much attention from listed companies, investors, and regulators. In response to the increasing demand of investors and regulators for non‐financial information, listed companies have paid attention to publishing ESG reports consisting of environmental, social, and governance information. Listed companies are increasingly required to provide high‐quality information that is clear and comparable. However, the lack of incentive to listed companies makes it hard to improve the quality of ESG disclosure, and the cost of ESG disclosure leads to the uncontrollable quality of ESG reports and may even manipulation by opportunistic behaviors. In this paper, we illustrate the moral hazard problem in ESG disclosure from the perspective of investors and listed companies, in which the effort level for listed companies to provide high‐quality ESG report cannot be observed by investors. Then we propose a blockchain‐based incentive mechanism for ESG disclosure from a principal‐agent perspective to improve the information quality of ESG disclosure, where investors act as principal and listed companies act as agents. Token in blockchain technology is utilized as the rewards to improve the listed companies' reputation, thus increasing their chance of being promoted to investors for preferential investment opportunities in the blockchain platform. We then design the first‐best (FB) and second‐best (SB) optimal contracts based on classic principal‐agent model to overcome the moral hazard problem. Extensive simulations are conducted to demonstrate the effectiveness and feasibility of the incentive mechanism.

Who to Target: Financial Performance, ESG Disclosure, and Short-Selling Activities in S&P 1500 Firms

Who to Target: Financial Performance, ESG Disclosure, and Short-Selling Activities in S&P 1500 Firms

Analysis of the Influence of Profitability, Leverage and ESG Disclosure on the Value of Sharia Stock Companies Registered on the ESGL Index

Analysis of the Influence of Profitability, Leverage and ESG Disclosure on the Value of Sharia Stock Companies Registered on the ESGL Index

The Moderating Effect of Board Characteristics on the Relationship between ESG Disclosure and Corporate Financial Performance: An Empirical Study

The Moderating Effect of Board Characteristics on the Relationship between ESG Disclosure and Corporate Financial Performance: An Empirical Study

Going Green and Firm Value: Mapping the Relationship Through a Literature Review

Objective: The purpose of this paper is to do a literature review of articles that study the effect of environmental initiatives and firm value. Theoretical Framework: In recent years, there has been a growing global interest in sustainability and environmental care. Companies have developed initiatives such as Corporate Social Responsibility (CSR) strategies, and Environmental Performance (EP) indicators to demonstrate their commitment to sustainability Method: The analysis includes publications on Environmental, Social, and Governance (ESG), CSR, EP, and environmental disclosure published between 2017 and early 2023. Results and Discussion: The findings show a positive relationship between firm value and CSR, EP, ESG, and environmental disclosure. Companies that adopt environmental initiatives tend to have greater protection against market uncertainty and generate greater stakeholder confidence. This positive relationship is more significant in developed countries than in developing countries. Research Implications: An opportunity for further research on this topic is identified due to the relatively low number of studies that explore the relationship between environmental behaviour and firm value in Latin America and the Caribbean.

Does non-financial information matter? Mapping and clustering literature on the value relevance of comprehensive disclosure

The paper aims to contribute to understanding the value relevance of compre-hensive disclosure, covering different types of information provided in addi-tion to traditional financial reporting. This research is based on an initial sam-ple of 361 documents available on the Scopus database as of December 2022. The study adopts a bibliometric analysis based on the similarity visualization technique on a final sample of 179 articles using the VOSViewer software, and it also performs a content analysis on a subsample of 49 articles. The study mapped and clustered research networks, providing a systematic literature overview. A steady increase of interest in the topic investigated has been observed in re-cent years, driven by the growing attention investors and other users deserve on the role of extended information in disclosing how the firm creates value. The network analysis reveals the existence of four main research streams re-ferring to the following topics: Intangibles, Intellectual Capital Disclosure (ICD) and corporate reputation; ESG and Sustainability disclosure; Environ-mental disclosure and capital market effects; Integrated Reporting and Value Creation. Results highlight prominent research fields and emerging trends, which calls for in-depth consideration of the value relevance of comprehen-sive disclosure within the academic and political space. This article adds to prior research on the topic investigated, combining quantitative and qualita-tive methods to systematize literature. In contrast to other review publications that rely primarily on specific reporting tools, our study refers to different types of reports, providing a systematic picture of the state of the art and fu-ture directions of literature on the value relevance of non-financial infor-mation.

ESG Rates Divergence on the Emerging Markets in the European Union

Abstract The growing emphasis on sustainability has led to a rise of ESG rating providers, but this expansion has brought challenges. ESG ratings are complex and can vary significantly between agencies, due to different scoring methods and non-standardized disclosures, making accurate assessments difficult. Moreover, investors and companies express limited confidence in the accuracy of these ratings. Regulatory developments aim to improve ESG disclosure and comparability, however, discrepancies in assessment criteria and rating methodologies persist. These aspects have led to the increasing concern of researchers from the academic field and professionals from the financial markets to identify how divergent are the ESG rates provided by various suppliers, what are the causes of this divergence, how do these influence the performance of companies and above all, how the negative effects of divergent ESG rates mitigated. Most researchers focused their attention on the aforementioned aspects on the developed financial markets from the USA or Europe, on the top companies or on the companies listed on the BRIC emerging markets. This article analyzes the divergence of ESG rates provided by three well-known rate-providers, for companies listed on emerging markets in Europe, contributing to increasing knowledge in this field.

Talks Much, Errs Much: Social Media Coverage on ESG Disclosure Quality in Emerging Markets

Talks Much, Errs Much: Social Media Coverage on ESG Disclosure Quality in Emerging Markets

THE ROLE OF AUDIT COMMITTEE ATTRIBUTES IN ENHANCING OF ENVIRONMENTAL, SOCIAL, AND GOVERNANCE DISCLOSURE STANDARDS

This research aims to evaluate how the characteristics of the audit committee contribute to the enhancement of environmental, social, and governance (ESG) reporting standards. The audit committee's contribution is assessed through financial acumen, scope, autonomy, and the regularity of its meetings. This study does not only focus on certain industries but all industries with ESG scores that are routinely assessed by Bloomberg for the 2017-2021 period in Indonesia except the financial industry. The sample comprises of 67 companies, so that the total observations used are 335 firm-years with fixed effect model data panel analysis. The findings imply that the independence of the audit committee's independence has a notably positive impact on the quality of ESG disclosures. Meanwhile, the frequency of audit committee meetings has a notably negative impact on the quality of ESG disclosures. However, financial expertise and the size of audit committee do not correlate to the quality of ESG disclosures. The sensitivity analysis supports the entire result of the hypothesis test. Sensitivity tests were carried out on each of the ESG components, namely Environmental, Social and Governance.

Unveiling the influence of ESG disclosures on corporate profitability: Insights from Thailand’s publicly listed companies

This study investigates the influence of Environmental, Social, and Governance Disclosures (ESGD) on the profitability of firms, using a sample of 385 publicly listed companies on the Thai Stock Exchange. Data from 2018 to 2022 is sourced from the Bloomberg database, focusing on ESGD scores as indicators of companies’ ESG commitments. The study utilizes a structural equation model to examine the relationships between independent variables; ESGD, Earnings Per Share (EPS), Debt to Assets ratio (DA), Return on Investment Capital (ROIC), Total Assets (TA), and dependent variables Tobin’s Q (TBQ) and Return on Assets (ROA). The analysis reveals a positive relationship between ESGD and TBQ, but not with ROA. Further exploration is conducted to determine if different ESGD levels (high, medium, low) yield consistent effects on TBQ. The findings indicate discrepancies: high and medium ESGD levels are associated with a negative impact on TBQ when EPS increased, whereas low ESGD levels correlate with an increase in TBQ with rising EPS. This nuanced approach challenges the conventional uniform treatment of ESGD in previous research and provides a deeper understanding of how varying commitments to ESG practices affect a firm’s market valuation and profitability. These insights are crucial for firm management, highlighting the importance of ESGD in relation to other financial variables and their effects on market value. This study offers a new perspective on ESGD’s impact, emphasizing the need for differentiated strategies based on ESG commitment levels.

Evolution and Challenges of Environmental, Social, and Governance Practices: An Analysis of the Brazilian Stock Exchange’s Corporate Sustainability Index

Environmental, social, and governance (ESG) practices are increasingly recognized as critical for corporate sustainability and market competitiveness, driven by heightened expectations from investors, governments, and consumers. This study examines the evolution of ESG practices among companies listed on the Brazilian Stock Exchange’s Corporate Sustainability Index (ISE B3) from 2005 to 2022. We analyzed the index portfolio’s composition, focusing on changes in ESG dimensions over time. The only six long-lived companies in this index, from retail, banking, and energy sectors, were selected for in-depth analysis. We further evaluated the quality and consistency of ESG disclosures in company reports. Findings indicate relevant fluctuations in the number of companies included in the ISE B3 and variations in ESG scores for the companies. These variations may be attributed to the voluntary nature of ESG practices and the absence of standard disclosure. This study reveals a lack of homogeneity in ESG reporting, which could be addressed by establishing more straightforward guidelines and global standards. This research underscores Brazilian companies’ challenges navigating diverse ESG frameworks to align with evolving societal and environmental expectations.

Does Eco-Feminism Affect the Quality of ESG Disclosures and Banking Performance?

Does Eco-Feminism Affect the Quality of ESG Disclosures and Banking Performance?

Does Business Ethics Disclosure Contribute to ESG Disclosure and ESG Performance on Firm Value?

Purpose: This study investigates whether Business Ethics Disclosure (BED) contributes to Environmental, Social, and Governance (ESG) disclosure and ESG performance, and how these factors influence firm value.Methods: Using data from publicly traded companies listed on the Indonesia Stock Exchange (IDX), we employ multiple regression analysis to examine the relationships between BED, ESG disclosure, ESG performance, and firm value.Findings: Our results indicate that BED significantly moderates the relationship between ESG disclosure and firm value. While ESG disclosure alone does not consistently impact firm value, the inclusion of BED enhances the positive effects of ESG practices on firm valuation.Novelty: This study contributes to the literature by highlighting the moderating role of business ethics in the ESG performance-firm value nexus, offering new insights into the interplay between ethical disclosures and ESG outcomes.Research Implications: The findings suggest that companies should integrate ethical disclosures into their ESG strategies to improve firm valuation. Policymakers and regulators are encouraged to establish comprehensive reporting standards that include ethical practices to enhance transparency and investor confidence.

The Moderating Role of Profitability and Firm Size in ESG Disclosure Towards Firm Value

The Moderating Role of Profitability and Firm Size in ESG Disclosure Towards Firm Value

Beyond Compliance: How ESG Reporting Influences the Cost of Capital in UK Firms

This research examines the effect of ESG disclosure on the cost of capital for non-financial firms in the UK, indexed by the FTSE All-Share Index, during the period from 2014 to 2018. Using multivariate analysis with ordinary least squares (OLS), fixed effects, robust regression, and Tobit models, this research assesses the effect of ESG reporting, governance, and the cost of capital, including robustness checks using an alternative ESG indicator, the environmental pillar score. Contrary to expectations, ESG reporting is positively associated with the cost of capital. However, corporate governance moderates this relationship, weakening the positive correlation and reversing it to a negative association for firms with strong governance practices, consistent with the hypotheses. This research also finds that firm size, liquidity, profitability, and leverage, positively affect the cost of capital, while board size, independent board composition, audit committee independence, and auditor type do not significantly influence it. Notably, non-executive directors on the audit committee have a significant negative effect on the cost of capital. These findings are valuable for investors, companies, regulators, auditors, policymakers, and the academic and research community. Specifically, for investors, this study provides insights into how ESG disclosures can influence investment risks and returns, highlighting the importance of robust corporate governance. Companies can leverage these insights to enhance their governance practices and optimize their capital costs. Regulators and policymakers can use the findings to develop guidelines that encourage transparent ESG reporting and strong governance frameworks, thereby improving market stability and investor confidence. Auditors can utilize the results to better understand the effect of non-financial reporting on financial metrics, helping to provide more accurate audits and assessments. These findings inform investors, companies, regulators, auditors, and academia, in fostering a more sustainable and transparent financial environment.

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.