Environmental, Social and Governance Disclosure and Value Generation: Is the Financial Industry Different?

Article


Gholami, Amir, Sands, John and Rahman, Habib Ur. 2022. "Environmental, Social and Governance Disclosure and Value Generation: Is the Financial Industry Different?" Sustainability. 14 (5), pp. 1-17. https://doi.org/10.3390/su14052647
Article Title

Environmental, Social and Governance Disclosure and Value Generation: Is the Financial Industry Different?

ERA Journal ID41498
Article CategoryArticle
AuthorsGholami, Amir (Author), Sands, John (Author) and Rahman, Habib Ur (Author)
Journal TitleSustainability
Journal Citation14 (5), pp. 1-17
Article Number2647
Number of Pages17
Year2022
PublisherMDPI AG
Place of PublicationSwitzerland
ISSN2071-1050
Digital Object Identifier (DOI)https://doi.org/10.3390/su14052647
Web Address (URL)https://www.mdpi.com/2071-1050/14/5/2647
Abstract

This study investigates the relationship between corporate environmental, social and governance (ESG) performance disclosure and profitability, highlighting the significant differences between the financial and non-financial sectors. This study uses an extensive Australian sample during the 2007-2017 period from Bloomberg's database. A panel regression model is used to evaluate the association between the corporate ESG performance disclosure and profitability to conduct an industry analysis. The robustness of the results is rigorously assessed using several robustness tests to evaluate the methodological, sample selection, endogeneity and causality issues associated with corporate ESG performance disclosure. This study finds that higher corporate ESG performance disclosure is associated with higher company profitability. However, the industry comparison analysis shows significant differences between financial and non-financial industries. This study finds that for companies operating in non-financial sectors, except for corporate governance, there is no significant association between corporate environmental and social elements and a company's profitability. Therefore, this study has implications for regulators and corporations. The empirical results of this study show that improving corporate ESG performance disclosure is beneficial to shareholders and other stakeholders in the long run. However, the enforcement of environmentally and socially responsible conduct improves profitability only in the financial industry. This study recommends that the regulators create a conducive institutional environment to promote ESG performance in the financial industry. Therefore, it enhances ESG awareness for the borrowers as well as helps economic development.

Keywordsenvironmental; social and governance; corporate performance; stakeholder theory
ANZSRC Field of Research 2020350107. Sustainability accounting and reporting
Byline AffiliationsSchool of Business
Holmes Institute
Institution of OriginUniversity of Southern Queensland
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