Investigating the Factors That Determine the ESG Disclosure Practices in Europe

Round 1

Reviewer 1 Report

Comments for author File: Comments.pdf

Author Response

Response letter to Sustainability – 2187704 Revised Version 16/02/2023

Journal Title: Sustainability MDPI

Manuscript Number: Sustainability - 2187704

Manuscript Title: Investigating the Factors that determine the ESG Disclosure Practices in Europe

Response to Reviewer 1 Comments and Suggestions:

1. The authors examine the impact of board structure and board strategy among others on ESG disclosure policy for European firms. Although the research idea is good, it is a bit hard to empirically test the idea.

Authors’ Response- Thanks, the research design is adequately designed to examine the relationship between board strategy among others on ESG disclosure policy for European firms. Following prior studies, we used regression analysis as multivariate analysis to examine this relation.

2.The empirical test lack the concern on the endogeneity issue, especially when R2 is less than 50%. The author may consider two-stage modelling. Because board characteristics may correlate with may other firm decision makings and board itself is the result of past firm history and performance, it is hard to test the causality.  

Authors’ Response- Thanks, we agree that endogeneity is unavoidable issues, in business research. Due to this, we added this as a limitation in our study. 

3. Currently fixed effect model is estimated with year-fixed effect. In addition, the model shall include country fixed effect and firm fixed effect as well.

Authors’ Response- Thanks for raising this important point. The study includes various country-level factors such as culture dimensions and country-level enforcement and including country-fixed effect will decrease the potential significant influences of the culture and enforcement variables.  

4. In the introduction section, the authors mentioned about ESG decision and its impact on firm value. The authors can further test whether the conform to ESG is positively affect firm value.

Authors’ Response- Thanks, the main interest of this paper is to focus on the relationship between some governance factors and ESG, future research may consider the nexus between firm value and ESG 

5. English language and style are fine/minor spell check is required.

Authors’ Response- Thank you for your comment. In this revised version, we spellchecked and corrected such typos and grammar mistakes. This revised version has also benefited from a professional proofreading and editing service. 

We would like to thank you very much for your positive comments and suggestion that have helped us to improve the paper.

Kind Regards,

Authors,

16/02/2023

Author Response File: Author Response.pdf

Reviewer 2 Report

The authors examine the impact of board structure and board strategy among others on ESG disclosure policy for European firms. Although the research idea is good, it is a bit hard to empirically test the idea. 

The empirical test lack the concern on the endogeneity issue, especially when R2 is less than 50%. The author may consider two-stage modeling. Because board characteristics may correlated with may other firm decision makings and board itself is the result of past firm history and performance, it is hard to test the causality. 

Currently fixed effect model is estimated with year fixed effect. In addition, the model shall include country fixed effect and firm fixed effect as well.

In introduction section, the authors mentioned about ESG decision and its impact on firm value. The authors can further  test whether the conform to ESG is positively affect firm value.

Author Response

Response letter to Sustainability – 2187704 Revised Version 16/02/2023

Journal Title: Sustainability MDPI

Manuscript Number: Sustainability - 2187704

Manuscript Title: Investigating the Factors that determine the ESG Disclosure Practices in Europe

Response to Reviewer 2 Comments and Suggestions:

The article "Investigating the Factors that determine the ESG Disclosure Practices in Europe" presents an interesting investigation, however, some recommendations are made. 

1. It is recommended that the authors add some additional clarification on the sample size. Especially with respect to the difference between the different countries. 

Authors’ Response- Thank you so much for your valuable comments. In this revised version we have updated the methodology section to make the additional clarification on the sample.   

2. On the other hand, to add some clarification as to why the countries themselves have not been considered as a differentiating variable.

Author’s Response- Many thanks for your comment. In this revised version we have updated the methodology and research limitations section and will use this as an avenue for future research.  

3. Revise formal issues. For example, lines 77, 78, 79 are blank. Table 2, Table 3 and Table 5 font size and type.

Authors’ Response- Many thanks for your valuable suggestion. In this revised version the formatting issues have been resolved and we have deleted unnecessary blanks in the text. 

We would like to thank you very much for your positive comments and suggestion that have helped us to improve the paper.

Kind Regards,

Authors

16/02/2023

Author Response File: Author Response.pdf

Reviewer 3 Report

Dear Authors:

The article "Investigating the Factors that determine the ESG Disclosure Practices in Europe" presents an interesting investigation, however, some recommendations are made.

It is recommended that the authors add some additional clarification on the sample size. Especially with respect to the difference between the different countries. 

On the other hand, to add some clarification as to why the countries themselves have not been considered as a differentiating variable.

Revise formal issues. For example, lines 77, 78, 79 blank.

Table 2, Table 3 and Table 5 font size and type.

Kind regards

Author Response

Response letter to Sustainability – 2187704 Revised Version 16/02/2023

Journal Title: Sustainability MDPI

Manuscript Number: Sustainability - 2187704

Manuscript Title: Investigating the Factors that determine the ESG Disclosure Practices in Europe

Response to Reviewer 3 Comments and Suggestions:

The research topic is moderately original, although it is true, companies should not only focus on strategies that go with the core of the business, but should also expand their strategies at the macro level. 

1.The variables that you have considered are very relevant, however, I think you could put a summary table that each variable refers to, since it is not clear to me what the INDIV variable refers to. 

Authors’ Response- Thank you so much for the valuable feedback and suggestions. In the revised version we have updated Table 2 to better represent the definitions of the variables.   

2. On the side of the conclusions, they are related to your hypotheses.

The references have an acceptable period of time, since there is a lot of literature on Corporate Governance, CSR, among others that you used. 

The subject seems correct to me and perhaps it would be good to extend it to large companies in emerging countries. 

Authors’ Response- Thank you so much for this comment. We have taken this suggestion on board and agree it would be a good area to further explore building on our current results. So, we already added this good point to our avenues for future research. 

3. English language and style are fine/minor spell check required

Authors’ Response- Many thanks for your comment. This revised version has benefitted from a professional proofreading and editing service. 

We would like to thank you very much for your positive comments and suggestion that have helped us to improve the paper.

Kind Regards,

Authors

16/02/2023

Author Response File: Author Response.pdf

Reviewer 4 Report

The research topic is moderately original, although it is true, companies should not only focus on strategies that go with the core of the business, but should also expand their strategies at the macro level.

The variables that you have considered are very relevant, however, I think you could put a summary table that each variable refers to, since it is not clear to me what the INDIV variable refers to.

On the side of the conclusions, they are related to your hypotheses.

The references have an acceptable period of time, since there is a lot of literature on Corporate Governance, CSR, among others that you used.

The subject seems correct to me and perhaps it would be good to extend it to large companies in emerging countries.

Author Response

Response letter to Sustainability – 2187704 Revised Version 16/02/2023

Journal Title: Sustainability MDPI

Manuscript Number: Sustainability - 2187704

Manuscript Title: Investigating the Factors that determine the ESG Disclosure Practices in Europe

Response to Reviewer 4 Comments and Suggestions:

1. Title: Investigating the Factors that determine the ESG Disclosure Practices in Europe

In this paper, the authors investigate the impact of board CSR orientation, board CSR strategy, GRI adoption, and Hofstede’s cultural characteristics on the firms’ level of ESG disclosure among European firms. The authors use 784 firms from 21 European countries between 2011 and 2020 and find a significant association between ESG disclosure, firms’ board characteristics, and country-level cultural characteristics. Controlling for national audit and regulatory environment is one of the paper’s strengths. The research idea is promising. 

Authors’ Response – Many thanks for this comment

Contribution 

2. The study needs more clarification on how the findings significantly add to the existing literature. For example, the study by Toumi et al. (2022) uses the same variables and analyzes the same concepts at the micro level in France. In another study, (Baldini et al., 2018) examine the relationship between cultural systems and ESG disclosure across multiple countries in Europe, North America, and Asian countries.

Authors’ Response – Thank you so much for this useful feedback and references. In the updated version, we have clarified this information.  

3. The same critique applies to the relationship between ESG disclosure and Board attributes such as independence and gender diversity.

There must be a justification for focusing on questions already answered in the literature (Cucari et al., 2018). If the cross-country feature is the added value, it must be theoretically explained and included in the analysis models. Empirical studies of his sort can benefit significantly from opposing arguments that create tension and signify the subject matter's importance. For the above reason, I find the originality and importance of the paper less than adequate. 

Authors’ Response – Thank you so much for this valuable feedback. In the revised version we have clarified the contribution thank you.

Literature 

4. There is also a growing interest in the materiality of ESG information disclosure (add to the avenues of future research) as part of the quality of disclosure.

The ESG disclosure is industry-driven, and stakeholders assign non-equal weights to different disclosure elements (Schiehll & Kolahgar, 2021). Analysis of such materiality is not as developed as I would expect from an academic paper in this field.  

Unfortunately, this has led to some serious methodological issues in the model specifications, such as a lack of control for the industry (i.e., industry-fixed effects). Unless the output variable (Bloomberg ESG scores) is sensitive to materiality, the lack of control for industry fixed effect is problematic. 

Authors’ Response – Thank you so much for this valuable feedback. In the revised version materiality literature has been added. Bloomberg ESG scores do include materiality when producing the scores by rating different industries based on the assessment of what is financially material to each industry. Bloomberg also recognises the role of corporate governance in protecting shareholders from risk. If the dataset was larger more control variables such as company leverage, industry, and investor base would be used to control which is recommended in Williams (2022). 

Hypotheses 

5. The authors limit their analyses of cultural dimensions to three out of the six dimensions (indulgence and restraint, masculinity and femininity, and uncertainty avoidance.) I couldn’t find the reasoning behind including these three dimensions and excluding the others. There is also a similar work by Roy and Mukherjee (2022), also mentioned by the authors. However, I would expect an elaboration of differences from that paper.

Authors’ Response - Thank you so much for this useful feedback. We completely agree with you in this point, and considering the limited time and other reasons, we refer to this pin as a research limitation and recommended avenue for future research. 

Methodology 

6. To provide separate evidence for each hypothesis, I suggest that authors re-run the analyses by creating three categories of variables representing 3.2.1 to 3.2.4. (Culture, board strategy, board orientation, and GRI adoption). As a robustness check, analyzing the low and high ESG disclosure companies concerning each category mentioned above would be interesting

Authors’ Response – Thanks for this suggestion, we believe that using continuous variables analysis provides more solid evidence to support our hypothesis. Moreover, adding the variables together provide robust evidence of the incremental benefits of each variable.

7. There is a significant variation in the number of firms across countries in the sample. The results may have been driven by the same fact. What is the ratio of capitalization of the sample firms in each country to the total capitalization of that country? If this ratio is constant, then there is no issue. If not, it will be problematic.

Authors’ Response - We agree with the reviewer’s point, but we have accounted for various country-level factors.   

8. Related to line 463: Although it is not a stretch to assume that ESG disclosure score is correlated with ESG performance score, the two are essentially not the same. It could be a case where ESG performance is low in a highly transparent firm about ESG issues.

Authors’ Response - Thank you so much for this comment. In the revised version of the manuscript, this has been updated, as recommended.  

9. Related to line 481: Why is the “CSR Committee” variable included in the model separately as a control variable and not as part of "CSR Orientation" factors?

Authors’ Response – Thank you so much for this comment. We used previous literature to measure CSR Orientation  (Helfaya and Moussa, 2017) that did not use CSR committee as factor. As this relationship between CSR committee and ESG disclosure has largely been tested we did not use this variable as one of our hypotheses.  

Variables 

10. The paper benefits from a clear explanation of how the authors compute B_ORINT, precisely, the components of board independence and gender diversity. The information provided does not help replicability. As for variable B_STRAT, the reader would appreciate knowing how this proxy is measured and how the promise of integrating ESG dimensions in the day-to-day decisions is delivered. Claiming one thing could be different from actual practice. In the best-case scenario, high scores of the ESG Disclosure Index are expected from firms that integrate ESG dimensions into their day-to-day decisions and hence create multicollinearity and endogeneity problems. The authors may want to exclude this variable from the model.

Authors’ Response - Thank you so much for your valuable comment. In this revised version we have updated table 2 with more descript definitions.  

11. Model specification fails to control for Industry and Firm Fixed Effects.

Authors’ Response – Thank you, we have added the industry effects and the Robust Cluster by firm ID and the results remain the same. 

Results 

12. This is related to lines 506 and 521: My understanding of GRI and CSR_Com variables is that they are categorical. Therefore, I would treat them as such and exclude them from tables where continuous variables are described, and correlation coefficients are computed.

Authors’ Response – As suggested, we removed both from correlation analysis.   

13. Related to lines 508 to 511: The statistics provided as the Hofstede dimensions are purely descriptive. The reader would appreciate having the story behind these numbers. Are these values high or low? How is the distribution of the sample based on these categories? Perhaps, the main contribution of the paper is here. Dividing the sample into subsets of high and low (along these dimensions) and investigating the impact of board attributes on ESG disclosure would be very interesting!

Authors’ Response – Thank you very much for the feedback and comments. In the revised version this has been updated.

14. In the regression result table, the number of observations has dropped significantly to 930 firm-year data points. Which countries, firms, and years are survived, and which ones have dropped from this analysis? Are there any specific patterns there that might systematically bias the results? Can we still claim that the results are extendable to a broader set of European countries?

The use of adjusted R-Squared instead of simple R-Squared is preferred.

Authors’ Response – Thanks for your comment, both are relatively similar in values.

15.The cross-country nature of the analysis calls for robust analysis regarding clustered observations and heteroskedasticity issues. Results from clustered regression analyses with standard errors that are heteroskedastic robust will add to the rigor of the analysis.

Authors’ Response – Thanks for raising this point, we run the analysis using cluster SE for heteroskedasticity and the results remain the same.

Discussions 

16. What is the economic significance of the estimated relationships?

Authors’ Response – Thank you so much for your helpful feedback. In this revised version this has been added, thank you again.  

17. Related to lines 662-663, 666-670: The conclusions mentioned are not tested in the paper.

Authors’ Response – Thank you so much for this valuable feedback. In the revised manuscript this has been removed.  

Minor issues 

18. This article would benefit from close editing. I found it difficult to follow the author’s argument due to the stylistic errors and transitions.

Authors’ Response – Thank you for this valuable feedback. In this revised version we edited the style from front to end to increase its readability.   

19. There are cross citations. References 1 to 5.

Authors’ Response – Thank you so much for this comment. The citations have been corrected.  

20. A citation is needed for the greenwashing mentioned on lines 64 and 65.

Authors’ Response – Thank you for this feedback. In this revised version a citation has been added for such an argument.  

21. Lines 100 to 102: The paper can be improved by elaborating on the theoretical link between strategy integration and cultural values.

Authors’ Response – Thank you so much for this suggestion. In the revised version we added such a link between strategy integration from management and culture.  

22. Lines 119 to 121: Discussion of the SASB disclosure regime where the materiality of the information disclosed is considered needs to be mentioned. 

Authors’ Response – Thank you so much for this valuable feedback. In the revised version of this manuscript this has been added thank you.  

23. Line 222: Please ensure that the citation is correct

Authors’ Response – Thank you so much for this comment. In the revised version this has been changed.  

24. The naming of INDIV, MAS, and UAI does not correspond with the logical expectation of their meanings. I sometimes find them confusing when interpreting the results. For example, it would be much easier to understand and interpret if INDIV = 1 meant a high individualism culture, not the opposite.

Authors’ Response - Many thanks for this comment. Sorry, we disagree with you as we can see these abbreviations are defined in table 2, and therefore the reader can easily understand and interpret them.

25. There is probably a typo in the definition of CSR_COM variable in table 2. I can’t understand the last three words “and 0 if a CSR”

Authors’ Response – Many thanks for this, the typo has been corrected.  

26. References.

Authors’ Response- Many thanks for your recommended/suggested references. In this revised version, we cited the below references across the frontend of this version, as appropriate.  

Baldini, M., Maso, L. D., Liberatore, G., Mazzi, F., & Terzani, S. (2018). Role of Country- and Firm-Level Determinants in Environmental, Social, and Governance Disclosure. Journal of Business Ethics, 150(1), 79–98. https://doi.org/10.1007/s10551-016-3139-1 

Cucari, N., Esposito De Falco, S., & Orlando, B. (2018). Diversity of Board of Directors and Environmental Social Governance: Evidence from Italian Listed Companies. Corporate Social Responsibility and Environmental Management, 25(3), 250–266. https://doi.org/10.1002/csr.1452 

Kolahgar, S., Babaghaderi, A., & Bhabra, H. S. (2021). Corporate Communication as A Governance Mechanism: A Content Analysis of Corporate Public Disclosures. Corporate Ownership & Control, 18(3), 438–468. https://doi.org/10.22495/cocv18i3siart16 

Roy, A., & Mukherjee, P. (2022). Does national culture influence corporate ESG disclosures? Evidence from cross-country study. Vision, 09722629221074914. 

Schiehll, E., & Kolahgar, S. (2021). Financial materiality in the informativeness of sustainability reporting. Business Strategy and the Environment, 30(2), 840–855. https://doi.org/10.1002/BSE.2657 

Toumi, N. B. F. , Khemiri, R. , & Makni, Y. F. (2022). Board directors’ home regions and CSR disclosure: evidence from France. Journal of Applied Accounting Research, 32(2), 509–539. https://doi.org/https://doi.org/10.1108/JAAR-02-2021-0032 

We would like to thank you very much for your positive comments and suggestion that have helped us to improve the paper.

Kind Regards,

Authors

16/02/2023

Author Response File: Author Response.pdf

Reviewer 5 Report

Title: Investigating the Factors that determine the ESG Disclosure Practices in Europe

In this paper, the authors investigate the impact of board CSR orientation, board CSR strategy, GRI adoption, and Hofstede’s cultural characteristics on the firms’ level of ESG disclosure among European firms. The authors use 784 firms from 21 European countries between 2011 and 2020 and find a significant association between ESG disclosure, firms’ board characteristics, and country-level cultural characteristics. Controlling for national audit and regulatory environment is one of the paper’s strengths. The research idea is promising.

Contribution

The study needs more clarification on how the findings significantly add to the existing literature. For example, the study by Toumi et al. (2022) uses the same variables and analyzes the same concepts at the micro level in France. In another study, (Baldini et al., 2018) examine the relationship between cultural systems and ESG disclosure across multiple countries in Europe, North America, and Asian countries.

The same critique applies to the relationship between ESG disclosure and Board attributes such as independence and gender diversity. There must be a justification for focusing on questions already answered in the literature (Cucari et al., 2018). If the cross-country feature is the added value, it must be theoretically explained and included in the analysis models. Empirical studies of his sort can benefit significantly from opposing arguments that create tension and signify the subject matter's importance. For the above reason, I find the originality and importance of the paper less than adequate.

Literature

There is also a growing interest in the materiality of ESG information disclosure as part of the quality of disclosure. The ESG disclosure is industry-driven, and stakeholders assign non-equal weights to different disclosure elements (Schiehll & Kolahgar, 2021). Analysis of such materiality is not as developed as I would expect from an academic paper in this field. Unfortunately, this has led to some serious methodological issues in the model specifications, such as a lack of control for the industry (i.e., industry-fixed effects). Unless the output variable (Bloomberg ESG scores) is sensitive to materiality, the lack of control for industry fixed effect is problematic.

Hypotheses

The authors limit their analyses of cultural dimensions to three out of the six dimensions (indulgence and restraint, masculinity and femininity, and uncertainty avoidance.) I couldn’t find the reasoning behind including these three dimensions and excluding the others. There is also a similar work by Roy and Mukherjee (2022), also mentioned by the authors. However, I would expect an elaboration of differences from that paper.

Methodology

To provide separate evidence for each hypothesis, I suggest that authors re-run the analyses by creating three categories of variables representing 3.2.1 to 3.2.4. (Culture, board strategy, board orientation, and GRI adoption). As a robustness check, analyzing the low and high ESG disclosure companies concerning each category mentioned above would be interesting.

There is a significant variation in the number of firms across countries in the sample. The results may have been driven by the same fact. What is the ratio of capitalization of the sample firms in each country to the total capitalization of that country? If this ratio is constant, then there is no issue. If not, it will be problematic.

Related to line 463: Although it is not a stretch to assume that ESG disclosure score is correlated with ESG performance score, the two are essentially not the same. It could be a case where ESG performance is low in a highly transparent firm about ESG issues.

Related to line 481: Why is the “CSR Committee” variable included in the model separately as a control variable and not as part of "CSR Orientation" factors?

Variables

The paper benefits from a clear explanation of how the authors compute B_ORINT, precisely, the components of board independence and gender diversity. The information provided does not help replicability.

As for variable B_STRAT, the reader would appreciate knowing how this proxy is measured and how the promise of integrating ESG dimensions in the day-to-day decisions is delivered. Claiming one thing could be different from actual practice. In the best-case scenario, high scores of the ESG Disclosure Index are expected from firms that integrate ESG dimensions into their day-to-day decisions and hence create multicollinearity and endogeneity problems. The authors may want to exclude this variable from the model.

There is also an endogeneity problem as to the variable GRI Adoption. This is no surprise to see a high score in the ESG disclosure index from Bloomberg for a firm that has adopted some form of ESG disclosure regime. The fact that such firms have taken the initiative and adopted GRI is highly correlated to the level of commitment to transparency and hence higher disclosure indices.

The firm’s characteristics are inadequately controlled. TQ is the only non-governance variable that aims to control inherent differences from firm characteristics. I would expect to see the inclusion of other widely documented control variables such as firm size, capital structure, risk, etc. The authors may benefit from (Kolahgar et al., 2021; Schiehll & Kolahgar, 2021)

Model specification fails to control for Industry and Firm Fixed Effects.

Results

This is related to lines 506 and 521: My understanding of GRI and CSR_Com variables is that they are categorical. Therefore, I would treat them as such and exclude them from tables where continuous variables are described, and correlation coefficients are computed.

Related to lines 508 to 511: The statistics provided as the Hofstede dimensions are purely descriptive. The reader would appreciate having the story behind these numbers. Are these values high or low? How is the distribution of the sample based on these categories? Perhaps, the main contribution of the paper is here. Dividing the sample into subsets of high and low (along these dimensions) and investigating the impact of board attributes on ESG disclosure would be very interesting!

In the regression result table, the number of observations has dropped significantly to 930 firm-year data points. Which countries, firms, and years are survived, and which ones have dropped from this analysis? Are there any specific patterns there that might systematically bias the results? Can we still claim that the results are extendable to a broader set of European countries?

The use of adjusted R-Squared instead of simple R-Squared is preferred.

The cross-country nature of the analysis calls for robust analysis regarding clustered observations and heteroskedasticity issues. Results from clustered regression analyses with standard errors that are heteroskedastic robust will add to the rigor of the analysis.

Discussions

What is the economic significance of the estimated relationships?

Related to lines 662-663, 666-670: The conclusions mentioned are not tested in the paper.

Minor issues

This article would benefit from close editing. I found it difficult to follow the author’s argument due to the stylistic errors and transitions.

There are cross citations. References 1 to 5.

A citation is needed for the greenwashing mentioned on lines 64 and 65.

Lines 100 to 102: The paper can be improved by elaborating on the theoretical link between strategy integration and cultural values.

Lines 119 to 121: Discussion of the SASB disclosure regime where the materiality of the information disclosed is considered needs to be mentioned. 

Line 222: Please ensure that the citation is correct

The naming of INDIV, MAS, and UAI does not correspond with the logical expectation of their meanings. I sometimes find them confusing when interpreting the results. For example, it would be much easier to understand and interpret if INDIV = 1 meant a high individualism culture, not the opposite.

There is probably a typo in the definition of CSR_COM variable in table 2. I can’t understand the last three words “and 0 if a CSR”

References

Baldini, M., Maso, L. D., Liberatore, G., Mazzi, F., & Terzani, S. (2018). Role of Country- and Firm-Level Determinants in Environmental, Social, and Governance Disclosure. Journal of Business Ethics, 150(1), 79–98. https://doi.org/10.1007/s10551-016-3139-1

Cucari, N., Esposito De Falco, S., & Orlando, B. (2018). Diversity of Board of Directors and Environmental Social Governance: Evidence from Italian Listed Companies. Corporate Social Responsibility and Environmental Management, 25(3), 250–266. https://doi.org/10.1002/csr.1452

Kolahgar, S., Babaghaderi, A., & Bhabra, H. S. (2021). Corporate Communication as A Governance Mechanism: A Content Analysis of Corporate Public Disclosures. Corporate Ownership & Control, 18(3), 438–468. https://doi.org/10.22495/cocv18i3siart16

Roy, A., & Mukherjee, P. (2022). Does national culture influence corporate ESG disclosures? Evidence from cross-country study. Vision, 09722629221074914.

Schiehll, E., & Kolahgar, S. (2021). Financial materiality in the informativeness of sustainability reporting. Business Strategy and the Environment, 30(2), 840–855. https://doi.org/10.1002/BSE.2657

Toumi, N. B. F. , Khemiri, R. , & Makni, Y. F. (2022). Board directors’ home regions and CSR disclosure: evidence from France. Journal of Applied Accounting Research, 32(2), 509–539. https://doi.org/https://doi.org/10.1108/JAAR-02-2021-0032

Author Response

Response letter to Sustainability – 2187704 Revised Version 16/02/2023

Journal Title: Sustainability MDPI

Manuscript Number: Sustainability - 2187704

Manuscript Title: Investigating the Factors that determine the ESG Disclosure Practices in Europe

Response to Reviewer 5 comments and suggestions:

Investigating the Factors that determine the ESG Disclosure Practices in Europe. This paper investigates the effect of companies’ board characteristics on ESG disclosure  practices within Europe. For this purpose, the authors gather data from Bloomberg and Refinitiv Eikon on companies headquartered in 22 European countries. The results show a positive association between board characteristics and CSR disclosure. The idea of this paper is interesting and may contribute to previous literature on corporate social responsibility in several directions. However, as I will discuss below, I have some concerns about the current version of the paper. 

1. The introduction section:

The authors need to: 

1. Justify in the introduction section why they expect a link between board characteristics and CSR disclosure (regardless of what they did in section 3: theoretical framework and hypotheses development).

Authors’ Response – Thank you very much for this comment. In the revised manuscript this point has been updated.  

2. Develop more the contributions to the current literature.

Authors’ Response – Thank you so much for this comment. In the revised manuscript this has been updated thank you. 

3. Provide a more detailed discussion of the obtained results (in a paragraph).

Authors’ Response- Thank you so much for your valuable feedback. In this revised version of the manuscript, this has been included. Thank you.  

4. The authors should provide more details on the sample construction:

The authors should give more details on the construction of the sample: how many companies they have initially gathered? How many companies they drop because of data unavailability? Did they use consolidated or unconsolidated statements? Did they use listed and or unlisted companies? Giving the whole process will add a lot of clarity. 

Authors’ Response – Thank you so much for this valuable feedback. In the revised manuscript, we have amended the methodology section  

5. The authors should explain whether they exclude financial industries from the sample? If no, did they control for differences in the behavior of financial and non-financial companies?

Authors’ Response – Thanks for this, we include data from all sectors as the study has no logical reason to exclude financial sectors. By re-running the analysis, we found no difference between the financial and nonfinancial sectors.

6. The authors provided a table on the number of companies per country. As a reader, I would like to also see a table describing the distribution of observations across years.

Authors’ Response – Thank you so much for this comment. In the revised version we have added this information to make it clearer.    

7. They should provide the rationale behind the choice of the period? Is it possible to take a longer period, especially why they start on 2011?

Authors’ Response- Thank you so much for your valuable feedback. With the initial collection of data, this was based on a 10-year period. Accordingly, we refer to this point as a research limitation.

8. The authors did not give details on how they clean the variables from outliers (did they choose to winsorize extreme values or to drop completely the outliers). Would the results be insensitive if we remove extreme values instead of the winsorize process? The authors should provide a robustness test from this Regard. –

Authors’ Response- Thanks for this, we were fortunate that data are reasonable with few outliers, which we excluded from our analysis.

Methodology and variables: 

9. I think that the authors should give more details on the ESG variables (the overall score and then sub-scores). The same information is required for the variables on CSR board orientation: the authors should discuss the different proxies they have used to capture CSR board orientation. They need also to discuss in depth the control variables and the expected signs for each variable based on the existing literature.

Authors’ Response – Thank you so much for your valuable feedback. In the revised manuscript Table 2 has been updated.  

10.They should write the model equation and build a link with each tested hypothesis (i.e., to say what is the expected sign of each coefficient associated to the main variables).

Authors’ Response: Thank you so much for this valuable feedback, in this revised version figure 1 has been added to clarify this point.

11. What is the estimation method they have used and what is the rationale behind this? Panel data estimation techniques should be considered in this case. The authors should also discuss and consider the potential endogeneity issue between the dependent variable (ESG Scores) and CSR board orientation Proxies.

Authors’ Response- Thanks, we used panel regression with fixed effect. We agree that endogeneity may be an issue but obviously is unavoidable in business research. Due to this, we added this as a limitation in our study. 

12. Country dummies should be used to control for heterogeneity among all the countries that are used

Authors’ Response- Thanks for raising this important point. This study includes various country-level factors such as culture dimensions and country-level enforcement and including country-fixed effect will decrease the potential significant influences of the culture and enforcement variables.  

Other comments: 

13. The overall writing of the paper should be improved.

Authors’ Response – Thank you so much for this valuable comment. This revised manuscript has been benefited from proofreading and editing thank you.  

14. The legend of the estimation tables should be improved: the variables should be defined, the period and the estimation method should be indicated.

Authors’ Response – Thanks, we added a note to the regression table to clarify this.

15. The title should be improved, I suggest: “board characteristics and CSR disclosure practices in Europe”.

Authors’ Response – Thank you so much for this comment. We will keep the original title.  

16. The abstract is too long and should be shortened.

Authors’ Response – Thank you so much for this comment. In the revised revision this has been shortened to meet the journal’s requirements.  

We would like to thank you very much for your positive comments and suggestion that have helped us to improve the paper.

Kind Regards,

Authors

16/02/2023

Author Response File: Author Response.pdf

Round 2

Reviewer 5 Report

Thanks for the revisions. 

Author Response

Response letter to Sustainability – 2187704 Revised Version 10/03/2023

Journal Title: Sustainability MDPI

Manuscript Number: Sustainability - 2187704

Manuscript Title: Investigating the Factors that determine the ESG Disclosure Practices in Europe

Response to Review 5 Comments and Suggestions:  

1. Extensive editing of English language and style required. Comments and Suggestions for Authors- Thanks for the revisions. 

Authors Response – Many thanks for this comment. To the best of our ability, we have proofread and revised the manuscript top down.

We would like to thank you very much for your positive comments and suggestions that have helped us to improve the paper.

Kind Regards,

Authors

10/03/2023

Author Response File: Author Response.pdf