Environmental Social Governance (ESG) Disclosure and Financial Markets

Dear Colleagues,

The Environmental, Social and Governance (ESG) activities of a firm are becoming increasingly important to investors; hence, there is increasing demand for the disclosure of these activities. When firms disclose their ESG activities, they are able to reduce the information asymmetry between the firm’s management and its stakeholders. Prior studies have found that the disclosure of ESG information has a significant impact on a firm’s financial and non-financial outcomes, such as lower cost of capital, better access to finance and increased firm valuation. As ESG disclosure can be used as a strategy to gain legitimacy, the characteristics of a firm may in turn determine the level of ESG information a firm may wish to disclose. Most studies have so far focused on ESG performance and its competitiveness in the form of lower costs of financing, improvement in supply chain management and regulatory reforms. Less attention has been paid to the accountability of the ESG reporting and its disclosures. Although there has been a growth in the number of firms disclosing their ESG information, the growth is still slow due to the inadequacy and lack of clarity of accounting standards related to the disclosure of this information. A lack of studies pertaining to ESG measurement and assurance has led to the existence of greenwashing companies. This has severe repercussions for the accuracy and reliability of ESG disclosures. The purpose of this Topic is to encourage studies on ESG disclosure and to shed light on the issues related to ESG disclosure. This Topic welcomes both empirical and theoretical studies covering themes related to ESG disclosure. Submissions that address (but are not limited to) the following topics are welcomed:

• The relationship between ESG practices and ESG disclosure.
• Differences in ESG disclosure practices across industries and countries.
• The impact of laws and regulations on the disclosure of ESG information and the existence of greenwashing activities.
• The impact of accounting standards on the disclosure of ESG information.
• The influence of ESG disclosure on firm outcomes such as cost of capital, access to finance, performance, valuation, etc.
• The influence of ESG disclosure on firm risk.
• The importance of firm characteristics and firm outcomes in influencing ESG disclosure practices in firms.
• The materiality issues in ESG disclosures and the increase in greenwashing activities.

Dr. Shaista Wasiuzzaman
Dr. Wan Masliza Wan Mohammad
Topic Editors