Determinants of Corporate Environment, Social and Governance (ESG) Reporting among Asian Firms

Corporate sustainability performance, stock returns, and ESG indicators: fresh insights from EU member states

It is believed that sustainable practices like environmental, social, and governance mechanisms help in providing a sustainable outlook for both companies and the governments. Such practices have their long-term impact on the stock returns and sustainable performance dynamics. This research aims to investigate the dynamic relationship between ESG indicators, stock returns, and sustainable performance reflected through economic, environmental, and social dimensions during 2010-2018. Panel data has been collected from various listed companies working in EU member states and analyzed through advanced panel estimations. The study findings inferred a significant and positive impact of all three measures of sustainable practices as reflected by targeted firms in the EU region on economic, environmental, and social dimensions of performance. On the other hand, those firms reporting higher ESG disclosure in their annual reports confirm better stock returns. Finally, study findings reveal that ESG dynamics provide a valuable contribution in creating some sustainable edge under the theoretical foundation of different theories. The study findings would greatly support providing a meaningful model for the listed firms to focus on their ESG indicators for higher performance in EES and stock returns. Finally, the current study expects to stimulate more theoretical and empirical work on ESG and EES. Future studies are suggested to consider the relationship between the stated variables regarding pre- and post-pandemic duration.

ESG Disclosure and the Cost of Capital: Is There a Ratcheting Effect over Time?

In recent years, the CSR disclosure–firm risk relationship has raised the acute interest of capital providers, regulators, debtholders, and academic researchers. In addition to the mounting corporate social responsibility (CSR) disclosure issues, one particular area that has increasingly attracted the attention of academics, practitioners, and policymakers is the dynamic of CSR disclosure. The effects of institutional pressures and the relative nature of reputation have amplified expectations over time, resulting in a dynamic CSR disclosure strategy to meet those expectations. However, studies on the relationship between CSR disclosure and firm risk over time are still in their premature stages. Thus, this paper seeks to contribute to the literature on firm risk and CSR disclosure by examining the effect of ESG disclosure on the cost of capital over time. The study examines a sample of 430 S&P 500 US firms observed over the 2011 to 2019 period. Our results indicate that the three dimensions do not have the same effect. Governance disclosure decreases the cost of capital during the first years, and in later years, the effect becomes positive. Over time, social disclosure increases the cost of capital. However, environmental disclosure shows a negative and significant effect on the cost of capital during the first years but no significant effect later in time. Our results contribute to explaining the dynamic effect of CSR disclosure. A predominant feature to consider is the evolution of CSR disclosure over time. Steadily, US firms are moving away from some CSR disclosure activities to others. However, firms that abandoned some existing CSR disclosure commitments may face aggressive responses from stakeholders. US firms have to be more cautious when linking CSR disclosure to firm risk over time, recognizing the long-term benefits and drawbacks of CSR disclosure.

Capital Structure and Its Determinants—A Comparison of European Top-Rated CSR and Other Companies

Corporate social responsibility (CSR), ethics, and sustainability have become an inseparable part of the discourse of modern business. Applying linear regression and comparison of intervals of beta-coefficients, we focused on the mediating role of CSR in the relations between capital structure and its determinants. Examining the sample of European large caps, we observed that CSR companies are significantly more leveraged than non-CSR ones. The influence of the corporate income tax rate and depreciation and amortization on leverage does not differ significantly between CSR and non-CSR companies. Moreover, tax shields seem to be insignificant for both CSR and non-CSR companies. However, we should stress that, for depreciation and amortization, the beta coefficient has a different significance in the model of CSR companies, compared to the model of non-CSR companies. Also, the difference between the models regarding the relations of leverage and asset tangibility is worth noting. Non-CSR companies with a higher proportion of fixed assets have lower leverage. This result was not confirmed for CSR companies. The hypothesis that CSR replaces the role of collateral cannot be confirmed. Available cash influences leverage negatively in both models, supporting the pecking-order theory. This result is much stronger for non-CSR companies compared to CSR ones. This study found fewer statistically significant differences between CSR and non-CSR companies regarding capital structure determinants than were expected.