Summary
Companies’ use of corporate social responsibility (CSR) strategies is increasingly trending, but it is not accompanied by forthcoming disclosure on environmental, social, and governance (ESG) practices. This disconnect can leave investors and other stakeholders with inadequate information that may impact their relationship with the organization. Researchers sought to gain an understanding of how firms should navigate the usage of ESG disclosure to best benefit performance. This study explores the effect of ESG disclosure on firm performance before and after the introduction of integrated reporting. Also considered in the research are the impacts of gender diversity, ownership, and board size on ESG disclosure.
Method
Data used was largely collected from Bloomberg and Capital IQ. Using statistics from 2009 to 2018, ordinary least squares and firm-fixed effects models were estimated. Lastly, a two-stage least squares model was supplemented to ensure thorough research.
Insights & Implications
— ESG disclosure benefits firm performance.
— Firms voluntarily involved in integrated reporting tended to perform better financially.
— ESG disclosure may draw in large shareholders, who in turn commit to ESG disclosure strategy to improve the firm’s image and long-term value.
— Board gender diversity has a positive effect on ESG disclosure, decision-making, and overall financial performance.
— A larger board size provided more unique perspectives that are likely to disclose more ESG information, leading to better firm performance.
Reference
Albitar, K., Hussainey, K., Kolade, N. and Gerged, A.M. (2020), “ESG disclosure and firm performance before and after IR: The moderating role of governance mechanisms”, International Journal of Accounting & Information Management, Vol. 28 No. 3, pp. 429-444.
Location of Article
This article is available online here (abstract free, purchase full article)
