Article2018

Environmental, social and governance transparency and firm value

Ellen Pei‐yi Yu · Qian Guo · Bac Van Luu

621 citations0/0 files storedBusiness Strategy and the Environment

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Corporate Social Responsibility Reporting Auditing, Earnings Management, Governance Corporate Governance and Financial Management

Abstract

Abstract We investigate whether environmental, social and governance (ESG) transparency, the extent of ESG disclosure, has an impact on firm value. Reducing investors’ information symmetry and agency costs is the mechanism by which better ESG transparency potentially impacts firm value. Using Bloomberg ESG disclosure scores to assess a firm's ESG transparency, we look at a sample of 1996 large cap companies across 47 developed and emerging countries and territories. Our empirical analyses suggest that the benefits from ESG disclosure outweigh their costs for the average listed firm. We find supporting evidence for greater disclosure of ESG issues boosting firm valuation measures, such as Tobin's Q. Furthermore, our results suggest that firms with greater asset size, better liquidity, higher R&D intensity, fewer insider holdings and good past financial performance will be more transparent in ESG issues.

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References

1997A Survey of Corporate Governance 2003Misery Loves Companies: Rethinking Social Initiatives by Business 2014The Impact of Corporate Sustainability on Organizational Processes and Performance 2013Corporate social responsibility and access to finance 1992The investment opportunity set and corporate financing, dividend, and compensation policies 2008What Matters in Corporate Governance?1999Understanding the determinants of managerial ownership and the link between ownership and performance 1994Tobin's q, Corporate Diversification, and Firm Performance

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