The moderating role of CEO power on the relationship between environmental, social and governance disclosure and financial performance in emerging market

Media coverage as a moderator in the nexus between audit quality and ESG performance: Evidence from China

In response to growing pressure on companies to manage and improve their reputation regarding environmental, social, and governance (ESG) issues, the audit is regarded as a vital resource for ensuring ESG risk management, improving transparency, mitigating opportunistic constraints, and guaranteeing accurate reporting. The objective of this paper was to investigate the role of audit quality in improving ESG performance, as well as to examine the role of media coverage represented by ESG controversy score in moderating these relationships. We analyzed 303 Chinese companies with 2,121 observations covering the period from 2017 to 2023. The results suggest that the effects of audit quality as measured by the Big 4 and audit fee on improving ESG performance are positive but not significant. On the other hand, the results reveal that media coverage serves as a positive, albeit non-significant, moderating variable between audit quality measured by the Big 4 and ESG performance, while it has a significant negative effect when audit quality is evaluated based on audit fees. The results indicate that improving ESG performance is significantly linked to auditors intensifying their practices and implementing their work more stringently. More importantly, media coverage is an important additional driver and economic incentive that encourages companies to steer clear of poor ESG-related practices.

Firm-level carbon risk perception and ESG performance

In a sustainable economy, each firm perceives different levels of carbon risk, but there are few studies on the relationship between a firm's carbon risk perception and Environmental, Social, and Governance (ESG) performance. This paper examines the impact of firm-level carbon risk perception on ESG performance using Chinese A-share listed firms during 2011-2020. We find a positive relationship between firm-level perception of carbon risk and firm ESG performance. Further analysis shows that analyst coverage and media attention exert a substantial moderating effect on the link between carbon risk perception and ESG performance. We identify three channels through which carbon risk perception affects ESG performance. First, rising carbon risk perception enables firms to take measures to reduce pollutants and greenhouse gas emissions and increases environmental (E) scores. Second, this perception encourages firms to take responsibility for social employment and increases social (S) scores. Finally, it improves firm sustainable governance and further increases governance (G) scores. Our research has an important guiding role in promoting firm ESG practice.