The Value Relevance of ESG Information: The Role of Recurrent Reporting of ESG Reports

Posted: 29 Apr 2022 Last revised: 24 Sep 2022

See all articles by Catherine Heyjung Sonu

Catherine Heyjung Sonu

Korea National Open University - Department of Management

Ahrum Choi

Sungkyunkwan University

Date Written: August 25, 2022

Abstract

This paper examines the value relevance of environmental, social, and governance (ESG) reports which have been issued over a long-term time horizon. Despite concerns raised about the reliability of ESG reports, these reports have become more prevalent over time, now serving as the main communication tool for a firm’s ESG activities. Using a sample of U.S. firms over the period 2002-2019, we show that investors value ESG activities more for firms with commitment to recurrent reporting of ESG reports. We find no evidence of ESG value relevance for firms that stopped issuing ESG reports. In addition, we find that firms recurrently issuing ESG reports are less subject to greenwashing, as indicated by lower energy consumption and reductions in injury rates. Cross-sectional tests show that the positive relation between the recurrent ESG reporting and value relevance is more pronounced among firms with poor information environment and high agency costs. The results are robust to sample heterogeneity, endogeneity concerns, and other robustness tests. Our findings provide evidence on the mechanism through which investors can better evaluate the credibility of ESG disclosures and inform standard-setters and regulators on ways to enhance the value relevance of ESG information.

Keywords: Environmental, social, and governance (ESG), value relevance, ESG report, recurrent reporting

JEL Classification: M14, M41

Suggested Citation

Sonu, Catherine Heyjung and Choi, Ahrum, The Value Relevance of ESG Information: The Role of Recurrent Reporting of ESG Reports (August 25, 2022). Available at SSRN: https://ssrn.com/abstract=4069287 or http://dx.doi.org/10.2139/ssrn.4069287

Catherine Heyjung Sonu

Korea National Open University - Department of Management ( email )

86 Daehakro Jongrogu
Seoul, 03087

HOME PAGE: http://professor.knou.ac.kr/hjsonu/index.do?epTicket=LOG

Ahrum Choi (Contact Author)

Sungkyunkwan University ( email )

53 Myeongnyun-dong 3-ga Jongno-ju
Guro-gu
Seoul, 110-745
Korea, Republic of (South Korea)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
368
PlumX Metrics