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Article
Publication date: 10 December 2021

Li Li Eng, Mahelet Fikru and Thanyaluk Vichitsarawong

The purpose of this paper is to examine the impact of sustainability disclosures and disclosure ratings on firm value. This paper compares the informativeness of…

Abstract

Purpose

The purpose of this paper is to examine the impact of sustainability disclosures and disclosure ratings on firm value. This paper compares the informativeness of sustainability disclosures in company reports versus environmental, social and governance (ESG) disclosure ratings. The authors examine the extent to which they provide incremental information.

Design/methodology/approach

The sample consists of panel data from over 2,600 publicly-listed non-financial US companies for the period 2014–2018. The authors obtain sustainability disclosures from Sustainability Accounting Standards Board (SASB) Navigator and ESG disclosure scores from Bloomberg. The authors regress market value and/or stock price on sustainability disclosures and ESG scores to evaluate information content.

Findings

ESG scores are positively associated with market value and price. Sustainability disclosures in the form of metrics and company-tailored narratives provide incremental information content on market value and/or price. Boilerplate disclosures reduce market value and price. Sustainability disclosures and ESG scores provide incremental information, suggesting that it would be beneficial to harmonize standards for reporting sustainability disclosures.

Research limitations/implications

The limitation is that the authors have only considered sustainability disclosures for a sample of US companies from two sources – SASB Navigator and Bloomberg.

Practical implications

The paper provides some evidence that may be pertinent to the debate on whether to harmonize the guidance on reporting sustainability issues.

Social implications

The paper provides evidence on the benefits to firms for reporting sustainability issues.

Originality/value

This paper is among the first to analyze company sustainability disclosures obtained from two different sources – SASB Navigator and ESG disclosure ratings – and compare them for relevance for company valuation. With SASB Navigator, the authors obtain further refinement into the nature of the information provided in the sustainability disclosures, that is, boilerplate, company-tailored or metrics disclosures.

Details

Sustainability Accounting, Management and Policy Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2040-8021

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Article
Publication date: 5 June 2018

Amina Buallay

Sustainability reporting has been widely adopted by firms worldwide given the need of stakeholders for more transparency on environmental, social and governance (ESG

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5288

Abstract

Purpose

Sustainability reporting has been widely adopted by firms worldwide given the need of stakeholders for more transparency on environmental, social and governance (ESG) issues. The purpose of this paper is to investigate the relationship between ESG and bank’s operational (Return on Assets), financial (Return on Equity) and market performance (Tobin’s Q).

Design/methodology/approach

This study examined 235 banks for ten years (2007-2016) to ends up with 2,350 observations. The independent variable is the ESG disclosure; the dependent variables are performance indicators (return on assets, return on equity and Tobin’s Q). Two type of control variables are utilized in this study: bank specific and macroeconomic.

Findings

The findings deduced from the empirical results demonstrate that there is significant positive impact of ESG on the performance. However, the relationship between ESG disclosures is vary if measured individually; the environmental disclosure found positively affect the ROA and TQ. Whereas, the corporate social responsibility disclosure is negatively affect the three models. However, the corporate governance disclosure found negatively affects the ROA, ROE and positively affects the Tobin’s Q.

Originality/value

The results of this study can be used to present a successful model for worldwide banks to concentrate on the role of ESG disclosure in performance.

Details

Management of Environmental Quality: An International Journal, vol. 30 no. 1
Type: Research Article
ISSN: 1477-7835

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Article
Publication date: 26 January 2022

Burcu Gurol and Valentina Lagasio

This study aims to investigate the relationship between banks’ board structure and sustainability performance.

Abstract

Purpose

This study aims to investigate the relationship between banks’ board structure and sustainability performance.

Design/methodology/approach

The empirical quantitative paper covers a sample of 35 European banks that are listed at the EUROSTOXX 600. Regression analysis techniques were used in the analyses.

Findings

Results indicate that board size, women ratio and independent directors ratio on board are positively and significantly related to environmental social governance (ESG), E and S disclosure scores. Also, we find that ESG disclosure is related to bank profitability.

Practical implications

Findings have implications for both policymakers and practitioners (bankers and investors). Large bank boards, which have women and independent members, could perform better in terms of ESG disclosure. The results also show that large banks and banks with high borrowing care more about sustainability. For banks to reach resources, they should perform well in terms of sustainability disclosure to their stakeholders.

Social implications

Banks should observe academic findings on corporate governance (CG) practices, which lead to a better ESG disclosure to structure their CG to improve at the best their disclosure policies: they should prefer larger boards with a high level of women and independence. In addition, we attach importance to the ESG performance of the banking sector due to its fund transfer functions. Banks transfer the deposits they collect to those in need of funds as loans. For this reason, it is important to which sector and which business they give credit. The importance of banks on ESG and their adoption of sustainability dimensions also affect their credit decisions.

Originality/value

This study examines the relationship between banks’ board structure variables and their effect on ESG, E and S scores separately. This study thinks that the G score can be a handicap for ESG-CG relations. Because chosen CG variables (women ratio, independent ratio, board size) affect G scores positively and can reason for positive ESG-CG relation. The environmental and social impact of women ratio, independent ratio and board size can be seen in this study.

Details

Social Responsibility Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1747-1117

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Article
Publication date: 8 November 2021

Muhammad Arif, Christohper Gan and Muhammad Nadeem

Motivated by the enactment of non-financial reporting regulations by the European Parliament, this paper aims to investigate the impact of European Union (EU) directive…

Abstract

Purpose

Motivated by the enactment of non-financial reporting regulations by the European Parliament, this paper aims to investigate the impact of European Union (EU) directive 2014/95/EU on the quantity of environmental, social and governance (ESG) disclosures by the S&P Europe 350 index firms. This study also investigates whether the implementation of the non-financial information (NFI) reporting regulations influences the association between ESG disclosures and firms’ earnings risk.

Design/methodology/approach

To measure the impact of mandatory regulations on the quantity of ESG disclosures, this study estimates the average treatment effects using a propensity weighted sample. Then this study uses the difference-in-differences method to estimate the differences in the association between ESG disclosures and earning risk before and after implementation of the EU directive.

Findings

The results show a significant positive impact of the EU directive on the quantity of ESG disclosures for the sample European public-interest entities, which indicates that the mandatory NFI reporting requirements could boost the availability of increasingly demanded ESG related information. The enhanced association between the ESG disclosures and firms’ earnings risk during the post-directive period reveals that mandating NFI reporting also increases the quality of ESG disclosures.

Originality/value

Using the legitimacy and decision-usefulness theories, this study provides novel evidence concerning the impact of the EU directive on the quantity and quality of ESG disclosures.

Details

Meditari Accountancy Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2049-372X

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Article
Publication date: 15 July 2021

Giuseppe Nicolò, Giovanni Zampone, Giuseppe Sannino and Serena De Iorio

Recent regulatory changes in Europe have promoted non-financial reporting practices (e.g., Directive, 2014/95/EU) and gender diversity in decision-making positions…

Abstract

Purpose

Recent regulatory changes in Europe have promoted non-financial reporting practices (e.g., Directive, 2014/95/EU) and gender diversity in decision-making positions. Special attention is devoted to promoting the gender balance on corporate boards as a key mechanism to enhance corporate governance effectiveness and better address multiple stakeholders' needs. With this in mind, this study intends to examine the impact of boardroom gender diversity on Environmental Social Governance (ESG) disclosure practices in the European listed firms' context.

Design/methodology/approach

The study applies different panel data models on an extended sample of 1,392 firms from 21 European Union (EU) countries for six years (2014–2019).

Findings

Findings allow to spotlight the positive role exerted by the presence of women directors on the boards in enhancing ESG disclosure, both at the overall and specific (individual ESG scores) level.

Research limitations/implications

Policymakers and regulators might consider the study's evidence as a stimulus to continue in promoting strategic actions and reforms that foster gender equality and balance in corporate decision-making positions.

Practical implications

Creating a heterogeneous and diversified board of directors may support implementing a “sustainable corporate governance” recently claimed by the EC.

Originality/value

The study contributes to the literature by disentangling the links between gender diversity and ESG disclosure over a period that covers a long season of European regulations and measures that affected both non-financial reporting practices and the board of directors' composition. Accordingly, it can contribute to enhancing the practical and theoretical understanding of the pivotal role that gender diversity may exert in strengthening corporate governance and, in turn, corporate transparency and accountability behaviours about non-financial issues.

Details

Journal of Applied Accounting Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0967-5426

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Article
Publication date: 14 June 2021

Muttanachai Suttipun and Thanyaorn Yordudom

This study aims to survey the extent, level and trend of environmental, social and governance (ESG) disclosures of top50 listed companies from Thailand, to test the…

Abstract

Purpose

This study aims to survey the extent, level and trend of environmental, social and governance (ESG) disclosures of top50 listed companies from Thailand, to test the different level of ESG disclosures of the companies between high profile industry and low profile industries and to examine the impact of ESG disclosures on the market reaction of top50 listed companies in Thailand.

Design/methodology/approach

Population and sample were top50 listed companies from the Stock Exchange of Thailand. Using corporate annual reports from 2015 to 2019, content analysis by word counting was used to quantify the extent, level and trend of ESG disclosures, while the market reaction was collected by the average stock price. Descriptive analysis, independent sample t-test, correlation matrix and multiple regression were used to analyze the data.

Findings

There was an increased level of ESG disclosures during the period being study. The most common ESG disclosures were social disclosure following by governance and environmental disclosures. Moreover, there were different levels of environmental disclosure of top50 listed companies between high and low profile industries, while no different levels of social and governance disclosures between high and low profile industries were found. Finally, the study found that environmental and social disclosures had a positive impact on market reaction, while there was a negative impact of governance disclosure on market reaction.

Originality/value

Thai investors can use ESG disclosures for their decision-making on investment.

Details

Journal of Financial Reporting and Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-2517

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Article
Publication date: 26 October 2020

Bahaaeddin Ahmed Alareeni and Allam Hamdan

This paper aims to investigate whether there are relationships among corporate disclosure of environmental, social and governance (ESG) and firms’ operational (ROA)…

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4003

Abstract

Purpose

This paper aims to investigate whether there are relationships among corporate disclosure of environmental, social and governance (ESG) and firms’ operational (ROA), financial (ROE) and market performance (Tobin’s Q), and if these relationships are positives or negatives or even neutral.

Design/methodology/approach

The study sample covers US S&P 500-listed companies during the period 2009 to 2018. Panel regression analysis was used to examine the study hypotheses and achieve the study aims.

Findings

The results showed that ESG disclosure positively affects a firms’ performance measures. However, measuring ESG sub-components separately showed that environmental (EVN) and corporate social responsibility (CSR) disclosure is negatively associated with ROA and ROE. EVN and CSR disclosure is positively related to Tobin’s Q. Further, corporate governance (CG) disclosure is positively related to ROA and Tobin’s Q, and negatively related to ROE. More importantly, ESG, CSR, EVN and CG tend to be higher with firms that have high assets and high financial leverage. Furthermore, the higher level of ESG, EVN, CSR and CG disclosure, the higher the ROA and ROE.

Originality/value

The study limns a vision of the role of ESG on firm performance. This study tries to determine whether there are relationships among all ESG disclosure and FP, and if they are positive, negative or even neutral.

Details

Corporate Governance: The International Journal of Business in Society, vol. 20 no. 7
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 7 December 2020

Muhammad Arif, Aymen Sajjad, Sanaullah Farooq, Maira Abrar and Ahmed Shafique Joyo

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…

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.

Details

Corporate Governance: The International Journal of Business in Society, vol. 21 no. 3
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 14 May 2018

Riadh Manita, Maria Giuseppina Bruna, Rey Dang and L’Hocine Houanti

The purpose of this paper is to investigate the relationship between corporate debt-like compensation and the value of excess cash holdings.

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3508

Abstract

Purpose

The purpose of this paper is to investigate the relationship between corporate debt-like compensation and the value of excess cash holdings.

Design/methodology/approach

The environmental, social and governance (ESG) disclosure score provided by Bloomberg is used as a proxy for the extent of corporate social responsibility (CSR). The empirical analysis is based on a sample of 379 firms that made up the Standard & Poor’s 500 Index over the period 2010-2015. In order to take into account the endogeneity problem between board gender diversity and ESG disclosure, a fixed effect model with lagged board variables is used.

Findings

Two main results arise from this study. First, no significant relationship is found between board gender diversity and ESG disclosure. Second, the evidence also partially confirms critical mass theory, as below three female directors the relationship between board gender diversity and ESG disclosure is not statistically significant. However, beyond that, no significant relationship was found.

Research limitations/implications

Reasonable theoretical arguments drawn from stakeholder theory suggest that board gender diversity may have a positive effect on ESG disclosure. The empirical evidence presented neither supports, nor denies stakeholder theory. However, the results may be improved by enlarging the frontiers of this research in time and space, increasing the perimeter of qualitative data integrated in this investigation.

Practical implications

This paper offers theoretical and empirical arguments for the feminization of corporate boards, not only in the name of equality between women and men and organizational justice, but also in the light of organizational performance (examined through the prism of governance). Transparency, analyzed using the proxy of ESG disclosure, is strongly and positively correlated with a feminization of boards, if the proportion of women is significant and sufficient to be able to prevent and surpass the “invisibilization” phenomenon, which is based on the marginalization of passive ultra-minorities, reduction to silence, marginalization (disqualification of women voice or exit strategy), assimilation or the endorsement of stigma.

Originality/value

First, this makes a theoretical contribution to the diversity and governance literature by examining the effect of WOCB on ESG disclosure through the stakeholder theory (Freeman, 2010). Second, the authors contribute to the CSR literature (cf. Byron and Post, 2016) by documenting specifically the effect of board gender diversity on CSR disclosures through ESG. Indeed, ESG research mainly concentrates on firm financial performance (Galbreath, 2013). No study has examined the relationship between WOCB and ESG disclosure. Finally, from an empirical standpoint, an FE model with lagged board variables (Liu et al., 2014) is used to fully address the endogeneity problems in the relationship between WOCB and ESG disclosure that may occur because of differences in unobservable characteristics across firms or reverse causality (Boulouta, 2013).

Details

Journal of Applied Accounting Research, vol. 19 no. 2
Type: Research Article
ISSN: 0967-5426

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Article
Publication date: 5 November 2018

Ahmed Aboud and Ahmed Diab

The purpose of this paper is to examine the impact of environmental, social, and governance (ESG) practices disclosure and firm value in the Egyptian context. This is done…

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2390

Abstract

Purpose

The purpose of this paper is to examine the impact of environmental, social, and governance (ESG) practices disclosure and firm value in the Egyptian context. This is done through investigating the influence of being listed and ranked in the Egyptian Corporate Responsibility Index on firm value during the period starting from 2007 to 2016.

Design/methodology/approach

Using univariate and multivariate analyses, the findings support the economic benefits of ESG disclosures.

Findings

The authors find that firms listed in the ESG index have higher firm value, and that there is a positive association between firms’ higher rankings in the index and firm value, as measured by Tobin’s q.

Research limitations/implications

The findings provide feedback to regulators and standard-setters in the developing countries, and more specifically the Egyptian regulators, on the benefits associated with the introduction of the sustainability index (Standard & Poor’s (S&P)/EGX ESG index). This, in turn, clarifies how the government’s efforts to promote ESG provide benefits to publicly traded firms.

Practical implications

By linking ESG to firm value, the ESG index will enable investors to take a leading role in inducing firms to enhance transparency and disclosure, and hence, improving their reporting standards. This, in turn, will ultimately result in improving sustainability and governance practices in Egypt.

Social implications

The reported positive market reactions to social and governance practices disclosures can motivate firms to improve their social and governance performance.

Originality/value

The study contributes to the literature by addressing the combined economic effects of social and governance disclosures on firm value, and by investigating the economic effects of such disclosures on firm value in an emerging market.

Details

Journal of Accounting in Emerging Economies, vol. 8 no. 4
Type: Research Article
ISSN: 2042-1168

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