The Impact of Environmental, Social, and Governance (ESG) Performance on Financial Reporting Quality: International Evidence
Open Access
- 6 September 2021
- journal article
- Published by Vilnius University Press in Ekonomika
- Vol. 100 (2), 190-212
- https://doi.org/10.15388/ekon.2021.100.2.9
Abstract
This study investigates the relationship between environmental, social, and governance (ESG) performance and financial reporting quality (FRQ) through the use of data from Datastream, Refinitive Eikon and ASSET4 databases. The initial sample of the study covers all available firms in ASSET4. After eliminating firms with missing data, the final sample of the study consists of 16,072 firm-year observations from 35 countries, covering the years from 2010 to 2017. Several FRQ proxies and firms’ ESG performance indicators are used in the study. The panel regression findings reveal that firms’ ESG performance has a positive impact on FRQ. In other words, it has been found that improving the ESG performance of firms yields higher FRQs. As for ESG pillars, this study finds a positive and statistically significant relationship between FRQ and environmental and governance pillars. The study extends the literature by providing international evidence not only about the aggregate effects of firms’ ESG performance on FRQ but also the effects of each of the three ESG pillars on FRQ.Keywords
This publication has 76 references indexed in Scilit:
- Board Composition and Corporate Social Responsibility: An Empirical Investigation in the Post Sarbanes-Oxley EraJournal of Business Ethics, 2012
- Corporate Social Responsibility and Earnings Management: Evidence from Asian EconomiesCorporate Social Responsibility and Environmental Management, 2012
- Legal Expertise on Corporate Audit Committees and Financial Reporting QualityThe Accounting Review, 2011
- Business Ethics and Financial Reporting Quality: Evidence from KoreaJournal of Business Ethics, 2011
- Communication of Corporate Social Responsibility: A Study of the Views of Management Teams in Large CompaniesJournal of Business Ethics, 2010
- Multinational corporations' corporate social and environmental disclosures (CSED) on web sitesInternational Journal of Commerce and Management, 2009
- Estimating Standard Errors in Finance Panel Data Sets: Comparing ApproachesThe Review of Financial Studies, 2008
- Corporate Social Responsibility, Investor Protection, and Earnings Management: Some International EvidenceJournal of Business Ethics, 2007
- Predicting Earnings Management: The Case of Earnings RestatementsSSRN Electronic Journal, 2003
- The Board as a Monitor of Organizational Activity: The Applicability of Agency Theory to Nonprofit BoardsNonprofit Management and Leadership, 2002