Skip to main content

Advertisement

SpringerLink
Log in

Firm characteristics, governance mechanisms, and ESG disclosure: how caring about sustainable concerns?

  • Research Article
  • Published:
Environmental Science and Pollution Research Aims and scope Submit manuscript

Abstract

Environmental, social, and governance (ESG) pillars help determine the business organizations’ sustainable business practices. Considering the same, this research examines the association between firm characteristics, governance mechanisms, and ESG for a sample of 564 firms from fifteen developed economies. For empirical analysis, ordinary least square, fixed effect, and random effect estimations techniques were applied using annual data from 2010 to 2019. The overall findings reveal that the governance structure of firms (board size, board independence, and cross-listing) play a significant role in ESG disclosure. Moreover, low corruption perception reflects higher ESG disclosure among the targeted firms. Additionally, firm characteristics; such as liquidity position shows a better reporting of ESG during the study period. When accounting for the ESG disclosure individually, the findings confirm the productive role of board size, current ratio, and low corruption towards environmental exposure. Lastly, the results demonstrate that board size and ESG disclosure promote better financial performance. These results offer valuable policy recommendations.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Similar content being viewed by others

References

  • Adams M, Jiang W (2016) Do outside directors influence the financial performance of risk-trading firms? Evidence from the United Kingdom (UK) insurance industry. J Bank Finance 64:36–51

    Article  Google Scholar 

  • Aggarwal R, Dow S (2013) Corporate governance and business strategies for climate change and environmental mitigation. In Entrepreneurship, finance, governance and ethics (pp. 315–340): Springer.

  • Alabdullah TTY (2016) Are board size and ownership structure beneficial in emerging markets’ firms? Evidence from Jordan. Int J Manag Inf Syst 20(3):87–94

    Google Scholar 

  • Alareeni BA, Hamdan A (2020) ESG impact on performance of US S&P 500-listed firms. Corporate Governance: Int J Bus Soc.

  • Albarrak MS, Elnahass M, Salama A (2019) The effect of carbon dissemination on cost of equity. Bus Strateg Environ 28(6):1179–1198

    Article  Google Scholar 

  • Albitar K, Hussainey K, Kolade N, Gerged AM (2020) ESG disclosure and firm performance before and after IR: the moderating role of governance mechanisms. Int J Account Inf Manag 28(3):429–444

  • Amel-Zadeh A, Serafeim G (2018) Why and how investors use ESG information: evidence from a global survey. Financ Anal J 74(3):87–103

    Article  Google Scholar 

  • Beekes W, Brown P, Zhan W, Zhang Q (2016) Corporate governance, companies’ disclosure practices and market transparency: a cross country study. J Bus Financ Acc 43(3–4):263–297

    Article  Google Scholar 

  • Bell RG, Filatotchev I, Rasheed AA (2012) The liability of foreignness in capital markets: sources and remedies. J Int Bus Stud 43(2):107–122

    Article  Google Scholar 

  • Bennear LS, Olmstead SM (2008) The impacts of the “right to know”: information disclosure and the violation of drinking water standards. J Environ Econ Manag 56(2):117–130

    Article  Google Scholar 

  • Breuer W, Müller T, Rosenbach D, Salzmann A (2018) Corporate social responsibility, investor protection, and cost of equity: a cross-country comparison. J Bank Finance 96:34–55

    Article  Google Scholar 

  • Bui B, Moses O, Houqe MN (2020) Carbon disclosure, emission intensity and cost of equity capital: multi-country evidence. Acc & Finance 60(1):47–71

    Article  Google Scholar 

  • Campbell JL (2007) Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility. Acad Manag Rev 32(3):946–967

    Article  Google Scholar 

  • Clementino E, Perkins R (2021) How do companies respond to environmental, social and governance (ESG) ratings? Evidence from Italy. J Bus Ethics 171(2):379–397

    Article  Google Scholar 

  • Cooper MJ, Gulen H, Ovtchinnikov AV (2010) Corporate political contributions and stock returns. J Financ 65(2):687–724

    Article  Google Scholar 

  • Correa-Garcia JA, Garcia-Benau MA, Garcia-Meca E (2020) Corporate governance and its implications for sustainability reporting quality in Latin American business groups. J Clean Prod 260:121142

    Article  Google Scholar 

  • Cuadrado-Ballesteros B, Rodríguez-Ariza L, García-Sánchez I-M (2015) The role of independent directors at family firms in relation to corporate social responsibility disclosures. Int Bus Rev 24(5):890–901

    Article  Google Scholar 

  • Czerwińska T, Kaźmierkiewicz P (2015) ESG rating in investment risk analysis of companies listed on the public market in Poland. Econ Notes: Rev Bank, Finance Monet Econ 44(2):211–248

    Article  Google Scholar 

  • Dahya J, McConnell JJ (2007) Board composition, corporate performance, and the Cadbury committee recommendation. J Financ Quant Anal 42(3):535–564

    Article  Google Scholar 

  • DallaVia N, Perego P (2018) Determinants of conflict minerals disclosure under the Dodd-Frank Act. Bus Strateg Environ 27(6):773–788

    Article  Google Scholar 

  • Dhaliwal D, Li OZ, Tsang A, Yang YG (2014) Corporate social responsibility disclosure and the cost of equity capital: the roles of stakeholder orientation and financial transparency. J Account Public Policy 33(4):328–355

    Article  Google Scholar 

  • Fatemi A, Fooladi I, Tehranian H (2015) Valuation effects of corporate social responsibility. J Bank Finance 59:182–192

    Article  Google Scholar 

  • Fidora M, Fratzscher M, Thimann C (2007) Home bias in global bond and equity markets: the role of real exchange rate volatility. J Int Money Financ 26(4):631–655

    Article  Google Scholar 

  • Frias-Aceituno JV, Rodriguez-Ariza L, Garcia-Sanchez IM (2013) The role of the board in the dissemination of integrated corporate social reporting. Corp Soc Responsib Environ Manag 20(4):219–233

    Article  Google Scholar 

  • Galbreath J (2013) ESG in focus: the Australian evidence. J Bus Ethics 118(3):529–541

    Article  Google Scholar 

  • Garcia AS, Mendes-Da-Silva W, Orsato RJ (2017) Sensitive industries produce better ESG performance: evidence from emerging markets. J Clean Prod 150:135–147

    Article  Google Scholar 

  • Ghoul SE, Guedhami O, Kim Y (2017) Country-level institutions, firm value, and the role of corporate social responsibility initiatives. J Int Bus Stud 48(3):360–385

    Article  Google Scholar 

  • Gu YJ, Filatotchev I, Bell RG, Rasheed AA (2019) Liability of foreignness in capital markets: institutional distance and the cost of debt. J Corp Finan 57:142–160

    Article  Google Scholar 

  • Hail L, Leuz C (2009) Cost of capital effects and changes in growth expectations around US cross-listings. J Financ Econ 93(3):428–454

    Article  Google Scholar 

  • Hainmueller J, Hiscox MJ (2015) Buying green? Field experimental tests of consumer support for environmentalism. Field Experimental Tests of Consumer Support for Environmentalism 1–30

  • He W (2011) Governance transparency and capital allocation: a note. Abacus 47(1):109–118

    Article  Google Scholar 

  • He X, Mishra S, Aman A, Shahbaz M, Razzaq A, Sharif A (2021) The linkage between clean energy stocks and the fluctuations in oil price and financial stress in the US and Europe? Evid QARDL Approach Resour Policy 72:102021

    Article  Google Scholar 

  • Husted BW (2005) Culture and ecology: A cross-national study of the determinants of environmental sustainability. MIR: Manag Int Rev, 349–371.

  • Husted BW, de Sousa-Filho JM (2019) Board structure and environmental, social, and governance disclosure in Latin America. J Bus Res 102:220–227

    Article  Google Scholar 

  • Ioannou I, Serafeim G (2012) What drives corporate social performance? The role of nation-level institutions. J Int Bus Stud 43(9):834–864

    Article  Google Scholar 

  • Irfan M, Ahmad M (2021) Relating consumers’ information and willingness to buy electric vehicles: Does personality matter? Transp Res Part d: Transp Environ 100:103049

    Article  Google Scholar 

  • Irfan M, Razzaq A, Suksatan W, Sharif A, Elavarasan RM, Yang C, Rauf A (2022) Asymmetric impact of temperature on COVID-19 spread in India: evidence from quantile-on-quantile regression approach. J Therm Biol 104:103101

    Article  CAS  Google Scholar 

  • Khan SAR., Godil DI, Jabbour CJC, Shujaat S, Razzaq A, Yu Z (2021) Green data analytics, blockchain technology for sustainable development, and sustainable supply chain practices: evidence from small and medium enterprises. Ann Oper Res, 1–25.

  • Kim E-H, Lyon TP (2015) Greenwash vs brownwash: exaggeration and undue modesty in corporate sustainability disclosure. Organ sci 26(3):705–723

    Article  Google Scholar 

  • Kingsley AF, Graham BA (2017) The effects of information voids on capital flows in emerging markets. J Int Bus Stud 48(3):324–343

    Article  Google Scholar 

  • Lang MH, Lins KV, Miller DP (2003) ADRs, analysts, and accuracy: does cross listing in the United States improve a firm’s information environment and increase market value? J Account Res 41(2):317–345

    Article  Google Scholar 

  • Lavin JF, Montecinos-Pearce AA (2021) ESG disclosure in an emerging market: an empirical analysis of the influence of board characteristics and ownership structure. Sustainability 13(19):10498

    Article  Google Scholar 

  • Leuz C, Lins KV, Warnock FE (2009) Do foreigners invest less in poorly governed firms? Rev Financ Stud 22(8):3245–3285

    Article  Google Scholar 

  • Liang J, Razzaq A, Sharif A, Irfan M (2022) Revisiting economic and non-economic indicators of natural resources: analysis of developed economies. Resour Policy 77:102748

    Article  Google Scholar 

  • Liu Y, Miletkov MK, Wei Z, Yang T (2015) Board independence and firm performance in China. J Corp Finan 30:223–244

    Article  Google Scholar 

  • Manes-Rossi F, Nicolò G, Tudor AT, Zanellato G (2020) Drivers of integrated reporting by state-owned enterprises in Europe: a longitudinal analysis. Meditari Account Res 29(3):586–616

  • Matos P (2020) ESG and responsible institutional investing around the world: a critical review. CFA Institute Research Foundation Literature Reviews 1–80

  • Merton RC (1987) A simple model of capital market equilibrium with incomplete information. J Finance 42(3):483–510

  • Ng AC, Rezaee Z (2015) Business sustainability performance and cost of equity capital. J Corp Finan 34:128–149

    Article  Google Scholar 

  • Pathan S, Skully M, Wickramanayake J (2007) Board size, independence and performance: an analysis of Thai banks. Asia-Pacific Finan Markets 14(3):211–227

    Article  Google Scholar 

  • Qiu W, Bian Y, Zhang J, Irfan M (2022) The role of environmental regulation, industrial upgrading, and resource allocation on foreign direct investment: evidence from 276 Chinese cities. Environ Sci Pollut Res, 1–17.

  • Razzaq A, Sharif A, Najmi A, Tseng ML, Lim MK (2021) Dynamic and causality interrelationships from municipal solid waste recycling to economic growth, carbon emissions and energy efficiency using a novel bootstrapping autoregressive distributed lag. Resour Conserv Recycl 166:105372

    Article  Google Scholar 

  • Razzaq A, Fatima T, Murshed M (2021a) Asymmetric effects of tourism development and green innovation on economic growth and carbon emissions in Top 10 GDP Countries. J Environ Plan Manag, 1–30.

  • Reber B, Gold A, Gold S (2021) ESG disclosure and idiosyncratic risk in Initial Public Offerings. J bus eth, 1–20.

  • Serafeim G, Grewal J (2017) The value relevance of corporate sustainability disclosures: an analysis of a dataset from one large asset owner. Available at SSRN 2966767.

  • Shao L, Zhang H, Irfan M (2021) How public expenditure in recreational and cultural industry and socioeconomic status caused environmental sustainability in OECD countries?. Econ Res-Ekonomska Istraživanja, 1–18.

  • Sharif A, Raza SA, Ozturk I, Afshan S (2019) The dynamic relationship of renewable and nonrenewable energy consumption with carbon emission: a global study with the application of heterogeneous panel estimations. Renew Energy 133:685–691

    Article  Google Scholar 

  • Sharif A, Aloui C, Yarovaya L (2020) COVID-19 pandemic, oil prices, stock market, geopolitical risk and policy uncertainty nexus in the US economy: fresh evidence from the wavelet-based approach. Int Rev Financ Anal 70:101496

    Article  Google Scholar 

  • Shen J, Jiuhua Zhu C (2011) Effects of socially responsible human resource management on employee organizational commitment. Int J Hum Resour Manag 22(15):3020–3035

    Article  Google Scholar 

  • Siew R (2014) Evaluating and enhancing the impact of sustainability reporting tools (SRTs). School of Civil and Environmental Engineering, the University of New South …,

  • Siew RY, Balatbat MC, Carmichael DG (2016) The impact of ESG disclosures and institutional ownership on market information asymmetry. Asia-Pac J Account Econ 23(4):432–448

    Google Scholar 

  • Sinha A, Mishra S, Sharif A, Yarovaya L (2021) Does green financing help to improve environmental & social responsibility? Designing SDG framework through advanced quantile modelling. J Environ Manage 292:112751

    Article  Google Scholar 

  • Solomon JF, Solomon A, Norton SD, Joseph NL (2011) Private climate change reporting: an emerging discourse of risk and opportunity? Account Audit Accountability J 24(8):1119–1148

  • Subramanian A, Mattoo A, Van Der Mensbrugghe D, He J (2009) Reconciling climate change and trade policy. Peterson Institute for International Economics Working Paper(09–15).

  • Suki NM, Sharif A, Afshan S, Suki NM (2020) Revisiting the Environmental Kuznets Curve in Malaysia: the role of globalization in sustainable environment. J Clean Prod 264:121669

    Article  Google Scholar 

  • Sun Y, Anwar A, Razzaq A, Liang X, Siddique M (2022) Asymmetric role of renewable energy, green innovation, and globalization in deriving environmental sustainability: evidence from top-10 polluted countries. Renew Energy 185:280–290

    Article  CAS  Google Scholar 

  • Sun Y, Guan W, Razzaq A, Shahzad M, An NB (2022) Transition towards ecological sustainability through fiscal decentralization, renewable energy and green investment in OECD countries. Renew Energy 190:385–395

    Article  Google Scholar 

  • Sun Y, Razzaq A, Sun H, Irfan M (2022b) The asymmetric influence of renewable energy and green innovation on carbon neutrality in China: analysis from non-linear ARDL model. Renew Energy.

  • Tamimi N, Sebastianelli R (2017) Transparency among S&P 500 companies: an analysis of ESG disclosure scores. Manag Decis 55(8):1660–1680

  • Tang C, Irfan M, Razzaq A, Dagar V (2022) Natural resources and financial development: role of business regulations in testing the resource-curse hypothesis in ASEAN countries. Resour Policy 76:102612

    Article  Google Scholar 

  • Tang C, Xue Y, Wu H, Irfan M, Hao Y (2022b) How does telecommunications infrastructure affect eco-efficiency? Evidence from a quasi-natural experiment in China. Technol Soc, 101963.

  • Townsend B (2020) From sri to esg: the origins of socially responsible and sustainable investing. J Impact and ESG Invest 1(1):10–25

    Article  Google Scholar 

  • Tulung, J. E., & Ramdani, D. (2018). Independence, size and performance of the board: an emerging market research. Corp Ownersh Control, 15(2).

  • VicSuper (2014) Annual Report | VicSuper. https://www.vicsuper.com.au/about-us/annual-report

  • Vitolla F, Raimo N, Rubino M (2020) Board characteristics and integrated reporting quality: an agency theory perspective. Corp Soc Responsib Environ Manag 27(2):1152–1163

    Article  Google Scholar 

  • Wright P, Ferris SP (1997) Agency conflict and corporate strategy: the effect of divestment on corporate value. Strateg Manag J 18(1):77–83

    Article  Google Scholar 

  • Xiang H, Chau KY, Iqbal W, Irfan M, Dagar V (2022) Determinants of social commerce usage and online impulse purchase: implications for business and digital revolution. Front Psychol 13:837042–837042

    Article  Google Scholar 

  • Yang Q, Du Q, Razzaq A, Shang Y (2022) How volatility in green financing, clean energy, and green economic practices derive sustainable performance through ESG indicators? A sectoral study of G7 countries. Resour Policy 75:102526

    Article  Google Scholar 

  • Yu EP-Y, Van Luu B (2021) International variations in ESG disclosure–do cross-listed companies care more? Int Rev Financ Anal 75:101731

    Article  Google Scholar 

  • Yumei H, Iqbal W, Irfan M, Fatima A (2022) The dynamics of public spending on sustainable green economy: role of technological innovation and industrial structure effects. Environ Sci Pollut Res 29(16):22970–22988

    Article  Google Scholar 

  • Zhang H, Razzaq A, Pelit I, Irmak E (2021) Does freight and passenger transportation industries are sustainable in BRICS countries? Evidence from advance panel estimations. Econ res-Ekonomska istraživanja, 1–21.

  • Zhu H, Cai K (2014) Cultural distance and bond pricing: evidence in the Yankee and Rule 144a bond markets. J Financ Res 37(3):357–384

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. School of Economics, Guangzhou City University of Technology, Guangzhou, China

    Fahad Khalid

  2. School of Economics and Management, Dalian University of Technology, Dalian, China

    Asif Razzaq

  3. Department of Business Administration, ILMA University, Karachi, Pakistan

    Asif Razzaq & Ummara Razi

  4. Business School, University of International Business & Economics, Beijing, China

    Jiang Ming

  5. School of Economics and Management, Qingdao University of Science and Technology, Qingdao, China

    Jiang Ming

Authors
  1. Fahad Khalid
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Asif Razzaq
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Jiang Ming
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Ummara Razi
    View author publications

    You can also search for this author in PubMed Google Scholar

Contributions

Fahad Khalid: Conceptualization, writing (original draft), formal analysis, data handling, and methodology. Asif Razzaq: Writing—review and editing. Jiang Ming: Conceptualization, writing (original draft), formal analysis, data handling, and methodology. Ummara Razi: Review and editing.

Corresponding author

Correspondence to Asif Razzaq.

Ethics declarations

Ethics approval and consent to participate

Not applicable.

Consent for publication

Not applicable.

Competing interests

The authors declare no competing interests.

Additional information

Responsible Editor: Arshian Sharif

Publisher's note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Khalid, F., Razzaq, A., Ming, J. et al. Firm characteristics, governance mechanisms, and ESG disclosure: how caring about sustainable concerns?. Environ Sci Pollut Res 29, 82064–82077 (2022). https://doi.org/10.1007/s11356-022-21489-z

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11356-022-21489-z

Keywords

Search

Navigation