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

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Abstract

This study investigates whether Environmental, Social, and Governance (ESG) disclosure can be a predictor of ESG performance among Thai firms listed on the Stock Exchange of Thailand. Employing a multidimensional approach, the research scrutinizes the relationship between ESG disclosure and performance, distinguishing between hard and soft disclosure forms. Utilizing Partial Least Squares Structural Equation Modeling (PLS-SEM) for data analysis and employing a multiple regression approach for robustness testing, the study draws on a sample of 241 observations from 67 firms spanning the period 2016–2019. The findings indicate that the measurement models of ESG performance are statistically significant. However, both hard and soft ESG disclosures were found to be insignificantly associated with ESG performance overall. Further examination reveals statistically significant associations between ESG disclosure and individual dimensions of ESG performance. Specifically, environmental and social hard disclosures demonstrate significant relationships with environmental and social performance, whereas governance hard disclosure and all dimensions of ESG soft disclosure exhibit no such association with performance. These results suggest that while hard disclosure of environmental and social activities by Thai listed firms tends to reflect their actual performance, soft disclosure across ESG dimensions may lack reliability. Stakeholders are advised to exercise caution when interpreting a firm’s ESG report. Additionally, Thai regulators are encouraged to prioritize ESG hard disclosure, given its apparent reliability and credibility.

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Authors and Affiliations

  1. Faculty of Business Administration and Accountancy, Khon Kaen University, 123 Mitraphap Road, Amphur Muang, Khon Kaen, 40002, Thailand

    Nithiphak Katisart, Siriluck Sutthachai & Krittapha Saenchaiyathon

Authors
  1. Nithiphak Katisart
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  2. Siriluck Sutthachai
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  3. Krittapha Saenchaiyathon
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Correspondence to Siriluck Sutthachai.

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Appendix 1

Appendix 1

List of definitions and measurement approaches of variables

ESGD

ESG disclosure index for the company

ESGP

Corporate’s ESG performance

ENVP

Corporate’s environmental performance

SOCP

Corporate’s social performance

GOVP

Corporate’s governance performance

HED

Hard environmental disclosure index for a company

HSD

Hard social disclosure index for a company

HGD

Hard governance disclosure index for a company

SED

Soft environmental disclosure index for a company

SSD

Soft social disclosure index for a company

SGD

Soft governance disclosure index for a company

SIZE

Firm size. Measured by the natural logarithm of the total assets as of the end of fiscal year

ROA

Return on assets. Measured by the net profit divided by total assets (Braam et al. 2016)

CEOC

CEO’s compensation. Measured by the annual compensation that CEO received divided by the total annual compensation of all directors on the board (Li et al. 2018)

LEV

Leverage. Measured as the ratio of total debt divided by total assets (Clarkson et al. 2011)

IND

Industry. Measured by using a dummy variable. It is equal one if a company is categorized as an environmental sensitive industry and 0 otherwise (Braam et al. 2016). For this study, the environmental sensitive industry is comprised with industrials, Property and Construction and Resources industry (Acaranupong, 2015)

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Katisart, N., Sutthachai, S. & Saenchaiyathon, K. Can stakeholders evaluate corporate ESG performance through its ESG disclosure? A study of Thai listed firms. Int J Discl Gov (2024). https://doi.org/10.1057/s41310-024-00243-6

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