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

Gholami, A.; Sands, J.; Rahman, H.U. Environmental, Social and Governance Disclosure and Value Generation: Is the Financial Industry Different? Sustainability 2022, 14, 2647. https://doi.org/10.3390/su14052647

17 Pages Posted: 18 Jul 2023

See all articles by Amir Gholami

Amir Gholami

Department of Business, Education, Law, and Arts

John Sands

University of Southern Queensland

Habib Ur Rahman

Holmes Institute - Higher Education Faculty

Date Written: February 24, 2022

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.

Keywords: Environmental; social and governance; Corporate performance; Stakeholder theory

Suggested Citation

Arian, Adam G. and Gholami, Amir and Sands, John and Rahman, Habib Ur, Environmental, Social and Governance Disclosure and Value Generation: Is the Financial Industry Different? (February 24, 2022). Gholami, A.; Sands, J.; Rahman, H.U. Environmental, Social and Governance Disclosure and Value Generation: Is the Financial Industry Different? Sustainability 2022, 14, 2647. https://doi.org/10.3390/su14052647, Available at SSRN: https://ssrn.com/abstract=4279069

Amir Gholami (Contact Author)

Department of Business, Education, Law, and Arts ( email )

Toowoomba 4350, Queensland
Australia

HOME PAGE: http://https://www.usq.edu.au/

John Sands

University of Southern Queensland ( email )

P.O.Box 238 Darling Heights
Toowoomba, 4350
Australia

Habib Ur Rahman

Holmes Institute - Higher Education Faculty ( email )

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