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The impact of audit committee attributes on the quality and quantity of environmental, social and governance (ESG) disclosures

Muhammad Arif (Department of Business Administration, Shaheed Benazir Bhutto University, Shaheed Benazirbad, Pakistan)
Aymen Sajjad (School of Management, Massey University, Albany, New Zealand)
Sanaullah Farooq (Faculty of Agribusiness and Commerce, Lincoln University, Lincoln, New Zealand)
Maira Abrar (Konkuk University – Seoul Campus, Gwangjin-gu, Republic of Korea)
Ahmed Shafique Joyo (Department of Business Administration, Shaheed Benazir Bhutto University, Shaheed Benazirbad, Pakistan)

Corporate Governance

ISSN: 1472-0701

Article publication date: 7 December 2020

Issue publication date: 8 June 2021

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Abstract

Purpose

The purpose of this research is to ascertain the impact of audit committee (AC) activism and independence on the quality and quantity of environmental, social and governance (ESG) disclosures for energy sector firms in Australia. This paper aims to understand how AC attributes such as meeting frequency, and the number of independent directors influence the compliance with the global reporting initiative (GRI) guidelines and quantity of ESG disclosures.

Design/methodology/approach

Bloomberg ESG disclosure scores and company reported AC attributes are collected and analysed using the pooled ordinary least square (OLS) regression framework with Petersen’s (2009) technique by using a two-dimensional cluster at the firm and year level. Further, this paper uses a lagged independent variable and two-stage least square approach to address endogeneity concerns.

Findings

The results show a significant positive effect of AC activism and independence on the level of compliance with the GRI guidelines, indicating the favourable effect of AC attributes on ESG reporting quality. Likewise, AC attributes positively affect the quantity of ESG disclosures. Notably, the impact of AC attributes is more pronounced on environmental disclosures.

Originality/value

This paper validates the significance of the management control mechanism in improving the quality and quantity of ESG disclosures for an environmentally sensitive sector, hence offering a potential answer to reduce agency and legitimacy issues for the sensitive industry firms.

Keywords

Citation

Arif, M., Sajjad, A., Farooq, S., Abrar, M. and Joyo, A.S. (2021), "The impact of audit committee attributes on the quality and quantity of environmental, social and governance (ESG) disclosures", Corporate Governance, Vol. 21 No. 3, pp. 497-514. https://doi.org/10.1108/CG-06-2020-0243

Publisher

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Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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