Article2021

The effect of social and ethical practices on environmental disclosure: evidence from an international ESG data

90 citations0/0 files storedCorporate Governance

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Corporate Social Responsibility Reporting Auditing, Earnings Management, Governance Environmental Sustainability in Business

Abstract

Purpose Given the rising global interest in the environmental, social and governance (ESG) index, the purpose of this paper is to investigate the impact of social and ethical practices on the firm’s environmental disclosure level. Design/methodology/approach To test the study’s hypotheses, the authors applied linear regressions with a data panel using the Thomson Reuters ASSET4 and Bloomberg database from seven countries in analyzing data of 523 listed companies selected from the ESG index between 2005 and 2017. Similarly, as an extension of the research and to address the potential unobserved heterogeneity and the dynamic endogeneity, the authors exploited the dynamic dimension of the data set through the generalized moment method (GMM) and estimated the impact of the one-year lagged value of the environmental disclosure. Findings The empirical results indicate a growing interest in corporate social responsibility (CSR) and ethical practices over the past decade. Besides, companies with a strong social and ethical commitment obtain significantly higher environmental disclosure scores. The results found with the GMM technique indicate the existence of dependence and continuity in environmental disclosure over time. Practical implications The research enables the information user to assess the transparency of the company as well as the quality of the information disclosed on its environment and its future growth opportunities in a context where the approach of business ethics occupies a central position in business valuation. The reached results suggest that the institutional and/or cultural factors affect top management’s environmental reporting behavior regarding the quality of published information. Originality/value This paper explores, for the first time, the effect of the social and ethical practices of ESG companies with seven different nationalities as well as its dynamic effect on the adoption of an environmental transparency strategy.

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References

1991Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations 1998Initial conditions and moment restrictions in dynamic panel data models 1995Initial conditions and moment restrictions in dynamic panel data models 2009How to do Xtabond2: An Introduction to Difference and System GMM in Stata 2002Audit committee, board of director characteristics, and earnings management 2010Voluntary Nonfinancial Disclosure and the Cost of Equity Capital: The Initiation of Corporate Social Responsibility Reporting 2004Do Institutions Cause Growth?1993Corruption

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