Although legitimacy theory provides strong arguments that environmental, social and governance disclosure and performance can help mitigate firm-specific risks, this relationship has been repeatedly challenged by conceptual arguments, such as ‘transparency fallacy’ or ‘impression management’, and mixed empirical evidence. Therefore, we investigate this relationship in the revelatory case of initial public offerings, which represent the first sale of common stock to the wider public. IPOs are characterised by strong information asymmetry between firm insiders and society, while at the same (...) time suffering from uncertainty in firm legitimacy, culminating in amplified financial risks for both issuers and investors in aftermarket trading. Using data from the United States, we demonstrate that voluntary ESG disclosure reduces idiosyncratic volatility and downside tail risk and higher ESG ratings have lower associated firm-specific volatility and downside tail risk during the first year of trading in the aftermarket. We provide theoretical arguments for the relationships observed, suggesting that companies striving for ESG performance and communicating their efforts signal their compliance with sustainability-related norms, thus acquiring and upholding a societal license to operate. ESG performance and disclosure help companies build their reputation capital with investors after going public. We also report that ESG disclosure is a more consistent proxy for ex-ante uncertainty as an indicator of aftermarket risk, thereby replacing some of the more conventional measures, such as firm age, offered in the existing literature. (shrink)

Over the past decade, sustainable finance has been a topic of burgeoning significance for investors, and ESG ratings have become commonly used to implement ESG investment strategies in practice. Strikingly, it is widely documented in both academic literature and investment practices that ESG ratings of a given firm can be extremely different across rating providers. However, despite the disagreement in ESG ratings being subject to a lot of criticism, only few studies have examined the sources and determinants of rating divergence. (...) This study examines whether quantitative ESG disclosure is conducive to rating convergence among agencies. Based on ESG rating data of Chinese A-share listed companies, the author finds that greater quantitative ESG disclosure, especially disclosure on environmental and social pillars, results in greater divergence of ESG ratings. When employing a difference-in-differences design with a quasi-experiment of disclosure guidance introduced by Hong Kong Exchange, the results show that if ESG disclosure is standardized and comparable, more numerical information reduces agencies' rating disagreement instead. Further analyses show that the lack of agreement is related to a low rating in the future. The author also finds that the effect of quantified ESG disclosure on rating divergence is more pronounced when firms are single businesses rather than diversified businesses with poor ESG performance rather than good ESG performance. The results are robust to alternative measures of ESG rating divergence, alternative sample, two-way clustering, and additional control variables. Taken together, the results indicate that quantitative ESG disclosure degenerates rating disagreement. (shrink)

The primary objective of this research is to examine the potential influence of environmental, social, and governance (ESG) disclosure on cash holdings. Additionally, the study explores the role of earnings management (EM) practices as a mediating factor in this relationship. The sample comprises 797 companies listed on financial markets across 19 European countries, and the data spans from 2013 to 2019. The outcomes indicate a significant negative correlation between ESG disclosure and cash holdings, implying that ESG performance can (...) be used by management to resolve disputes with stakeholders. The outcomes further indicate that the existence of EM practices partially mediates the link between ESG disclosure and cash holdings. Moreover, they are robust by substitute cash holdings specification, three distinct initiatives of ESG disclosure (i.e., environment, social, and governance), and a two-stage least squares assessment. Therefore, the findings document that nonfinancial reporting in the form of ESG disclosure can assist in controlling agency conflict, leading to better valuations of company performance by stakeholders. (shrink)

Driven by the theory of sustainable development, Chinese firms have gradually realized the importance of ESG disclosure. Executives play a core role in ESG decision-making, but whether and how top management team (TMT) faultlines affect ESG disclosure has yet to be systematically discussed. Based on the attention-based view and faultline theory, we select 6456 observations of 910 Chinese A-share listed firms from 2012 to 2021 as the research object to empirically test the above critical practical issues that have (...) not been fully answered. We find that TMT information-based faultlines improve firms' ESG disclosure, but TMT social category faultlines reduce firms' ESG disclosure. In addition, the internal mechanism test showed that the TMT's future-oriented attention plays a mediating role in the above relationship. Finally, we also find that institutional shareholding enhances the positive impact of the TMT's future-oriented attention on ESG disclosure. This study enriches the literature on TMT faultlines and ESG disclosure, demonstrating that the composition of the TMT and its attention allocation are important factors for promoting firms' ESG disclosure. The conclusions of this study can help firms strengthen their ESG disclosure by building efficient TMTs and provide important implications for firms to better fulfill their ESG responsibilities. (shrink)

The main objective of this study is to understand the value of environmental, social, and governance (ESG) disclosure assurance in the context of the development of sustainable finance standards and laws. This study is based on an analysis of 188 comment letters submitted by such actors in the context of public consultations on the development of three new sustainable finance initiatives (the CFA Institute, the Financial Conduct Authority in the UK, and the New Zealand parliament). The study shows these (...) actors' nuanced and often quite critical perceptions of the effectiveness of external assurance in preventing greenwashing and their reservations about its mandatory nature. These actors have raised various criticisms, including concerns about the vagueness surrounding verification practices; the lack of expertise available to conduct assurance in a new, specialized, and complex field; the costs of the assurance process, particularly for small players; and the lack of control over the reliability of the ESG data used. This article contributes to several emerging trends in the literature—in particular, research on governance practices to prevent greenwashing, on the institutionalization of sustainable finance standards and laws, and on the role of rational myths in the assurance process for ESG disclosures. (shrink)

The objective of this research is to investigate the effects of corporate governance scores and environmental, social, and governance scores (ESG) on firms’ cost of capital in emerging countries. The sample consists of 800 firm-year observations collected from Thomson Reuters. We analyze the data using panel-corrected standard errors (PCSE) regressions, which correct for heteroskedasticity issues and contemporaneous errors in the data. When moderated with emerging market variable, our findings indicate that in the financial sector, corporate governance and ESG score is (...) negatively associated with cost of capital. Nonetheless, in the nonfinancial sector, no evidence is found on the effect of corporate governance and ESG on cost of capital. Our findings indicate that emerging countries, different institutional, ownership, and legal structural has an effect on corporate governance and ESG implementation. (shrink)

This study examines the volatility risk for firms that are rated high on environmental, social, and governance (ESG) dimensions in emerging markets and developed markets outside the United States and Canada. Employing the Morgan Stanley Capital International (MSCI) ESG Leader indices, this study investigates the impact of good news and bad news on the volatility risk for the highest ESG-rated firms through multivariate DCC-EGARCH modeling. This study finds that the impact of a negative news shock of size 2 standard deviations (...) is approximately 45% higher than that of a positive news shock of the same size for the case of the developed markets under interest. With respect to emerging markets, this study reports that the impact of a negative news shock of size 2 standard deviations is 41% higher than that of a positive news shock of the same size. The results provide empirical evidence in support of the hypothesis that the volatility impact of news for high ESG-rated firms in developed markets and emerging markets is larger for bad news compared to good news, and the results are robust across time. The empirical findings underline the importance of reporting-related disclosures of ESG initiatives, and provide seminal evidence of a slow response to news by high ESG-rated firms in emerging markets. (shrink)

Stories about corporate social responsibility have become very frequent over the past decade, and managers can no longer ignore their impact on firm value. In this paper, we investigate the extent and the determinants of the stock market’s reaction following ordinary news related to environmental, social and governance issues—the so-called ESG factors. To that purpose, we use an original database provided by Covalence EthicalQuote. Our empirical analysis is based on about 33,000 ESG news, targeting one hundred listed companies over the (...) period 2002–2010. On average, firms facing negative events experience a drop in their market value of 0.1%, whereas companies gain nothing on average from positive announcements. We find also that market participants are responsive to the media, but they do not react to firms’ press releases or to NGOs’ disclosures. Moreover, our results indicate that sector’s reputation mitigates the loss and that cultural proximity and lexical contents of ESG disclosures play a significant role in the magnitude of the impact. (shrink)

The era of sustainable transformation has witnessed an increase in corporate environmental, social, and governance (ESG) disclosure waves. Using Chinese A-share listed companies from 2016 to 2021 as a sample, this study adopted textual analysis and machine-learning techniques to analyze ESG reports and explore the imitation behavior of ESG disclosures in emerging Chinese markets for the first time. The results show imitation behavior exists in corporate ESG disclosures from the perspective of group association. Regarding the imitation object, enterprises tend (...) to choose the peer average level as a reference rather than the best enterprise in the same industry, which reveals the inherent law that enterprises' ESG disclosures are satisfied with compliance rather than championship. In terms of effects, the ESG-mimetic isomorphic pressure has no incremental information effect but has an efficiency optimization effect. Furthermore, the imitation intensity and impact effects of ESG disclosure behavior exhibit heterogeneity owing to differences in properties, sales growth rates, and external attention. This study expands the motivation for corporate ESG disclosure behavior and enriches the empirical evidence for institutional isomorphism. (shrink)

India’s present sustainability framework for corporates largely consists of scattered obligations across various legislative frameworks. The purpose of this study is to understand corporate response to different sustainability obligations in India. Through this, the study aims to understand if the CSR regime alone is enough to meet India’s sustainability requirements or if further changes are required. CSR disclosures of the top 25 fortune India 500 companies over 2 years are contrasted against their ESG risk rating per Indian and foreign ESG (...) risk rating agencies. Findings indicate that all eligible companies are large proponents of CSR but are hardly in tune with the other sustainability obligations under Indian laws. Unfortunately, the impactful CSR regime does not appear to result in good ESG performances. In response to this finding, the paper concludes with recommendations to rectify the same. (shrink)

Despite much research now being published on Environmental, Social, and Governance (ESG) investments and Initial Public Offerings (IPOs) withdrawal risk, there appears to be a lack of evidence on the prospective IPO withdrawal risk associated with voluntary disclosure of ESG policies. This paper investigates the influence of ESG disclosure on IPO withdrawal by comparing voluntary ESG disclosure to conventional IPOs in the international market. A large data set is employed here, containing 33,535 failed and successful IPOs from (...) 1995 to 2019 from several nations with their own legal systems, cultural norms, and economic systems. The findings reveal that voluntary disclosure of ESG practices does significantly reduce the likelihood of an IPO withdrawal, by as much as 48%. These findings strongly suggest that organizations engaged in ESG activities perceive voluntary disclosure as an incentive, to adhere to social expectations. Consequently, reducing the asymmetry of information between IPO participants minimizes the withdrawal risk these companies face, hence diminishing doubts about their legitimacy. The results have consequences for IPO businesses, investors, researchers, and regulators. (shrink)

In recent years, companies receive pressure to release environmental, social, and governance disclosure, since these are perceived as critical issues by society. Despite this pressure, ESG disclosure practices considerably vary by firm. Prior academic literature investigated country- and firm-level factors determining such variation, alternatively adopting the institutional and legitimacy theory. By combining these theories in a unique framework, this study investigates the extent to which social structures and social legitimization influence ESG disclosure practices and each pillar. Results (...) obtained using a cross-country sample of 14,174 firm-year observations during 2005–2012 provide evidence that country-level characteristics such as a political system, labor system, and cultural system significantly affect firms’ ESG disclosure practices. However, their impact is heterogeneous in that they either reduce or enhance disclosure levels and may differ by pillar. Results for firm-level characteristics related to a firm’s visibility demonstrate a positive and homogeneous effect on ESG disclosure and each pillar. These results inform policy makers and regulators aiming to enhance ESG disclosure levels of the risk they incur when managing variables related to social structure and the benefits of exposing firms to higher visibility. (shrink)

Governing greenwashing in environmental, social, and governance (ESG) disclosure is an important issue, but relevant literature is scant. Based on the data on Chinese A-share listed firms from 2012 to 2021, we investigate the governance role of corporate digital transformation (DT) in ESG greenwashing and its influencing mechanism. We find that DT significantly inhibits ESG greenwashing. Moreover, DT mitigates ESG greenwashing by enhancing corporate green technology innovation (i.e., innovation channel), reducing information asymmetry (i.e., information channel), and increasing trade credit (...) (i.e., resource channel). From the perspective of investor attention, we find that both retail investors' online opinions and institutional investors' site visits strengthen the inhibitory effect of DT on ESG greenwashing. Furthermore, such an inhibitory effect is more pronounced in large firms, industries with high competition, and regions with strong intellectual property protection. This research provides new insights and policy suggestions for governing corporate ESG greenwashing behavior. (shrink)

According to information asymmetry theory and stakeholder theory, this article explores the impact and mechanism of environmental, social, and governance information disclosure on the company’s future stock price crash risk based on the A-share listed companies from 2010 to 2019. We find that ESG information disclosure significantly reduces the company’s future stock price crash risk. This conclusion remains robust after a series of robustness tests, such as PSM-DID. The heterogeneity analysis shows that the negative relationship between ESG (...) class='Hi'>disclosure and stock price crash risk is more significant in state-owned enterprises, companies with higher agency costs, and when companies in the bull market. The mechanism is that companies choose to disclose ESG information to alleviate information asymmetry problems and enhance corporate reputation capital, thus reducing the future stock price crash risk. This article shows that strengthening ESG construction will help improve the efficiency of China’s resource allocation and promote the capital market development. (shrink)

Voluntary disclosures of sustainability information have recently received considerable attention by investors, regulators, and public companies in improving reliability and integrity of corporate reporting. We examine the association between the quantity and quality of sustainability disclosures and earnings quality in the context of corporate ethical value and culture. We posit that sustainability disclosures of environmental, social, and governance (ESG) performance reports are linked to earnings quality, because of the importance of both earnings quality and ESG sustainability disclosures to investors and (...) trustworthiness of corporate reporting. We collect our sample of 35,110 firm-year observations between 1999 and 2015. Using both difference-in-difference tests and OLS regression, we find that sustainability disclosure quantity is positively associated with innate earnings quality and negatively correlated with discretionary earnings quality in mitigating managerial earnings manipulation and unethical opportunistic reporting behavior. Further tests illustrate that sustainability disclosure quality can strengthen the positive relation between innate earnings quality and sustainability disclosure quantity and mitigate the negative relation between discretionary earnings quality and sustainability disclosure quantity. Finally, additional tests suggest that the relation between earnings quality and sustainability disclosure quantity is moderated by corporate structure and prior-year sustainability performance. Our results provide policy, practical, and research implications as ESG sustainability reporting is being integrated into corporate culture and business models. (shrink)

The Securities and Exchange Commission requires the disclosure of changes to or waivers of corporate codes of ethics. Because the nature of amendments or waivers can vary, we expect the text of Item 5.05 to include different topics within different filings. We examine the population of these disclosures in Item 5.05 8-K filings from 2004 to 2020. While previous studies utilized small samples (fewer than 50 observations) to examine limited aspects of these filings, we use the population of these (...) filings from 2004 to 2020 (2121 8-K filings) to elucidate the nature and details of the disclosures. We assess whether Latent Dirichlet Allocation—a computational linguistics technique—can help discern the underlying topics represented in filings. While the Securities and Exchange Commission identifies two topics—amendments and waivers—the Latent Dirichlet Allocation analysis reveals four topics (three related to amendments): (1) code updates and clarifications; (2) combining codes of conduct for all officers and employees, or splitting codes to include a code directly applicable to senior financial officers; (3) codes of ethics waivers; and (4) substantive code changes. The overall trend is for fewer 8-Ks to be filed in recent years, with updates and clarifications becoming the predominant filing type. Our results further indicate that Item 5.05s related to updates and clarifications, and those related to combined or split codes, use fewer words and are more easily readable than those disclosing waivers or material code changes. Although we find no significant price reaction to Item 5.05 8-K filings, we find significant trading volume and volatility reactions, suggesting that these disclosures could give rise to differences in opinion among investors, which is consistent with the US Senate's assertion that these disclosures are of interest to investors. (shrink)

The purpose of this study is to explore the extent and nature of sustainability disclosure practices of companies from environmentally sensitive industries in India. It further investigates the influence of potential determinants on sustainability information disclosure of the companies. The study analyzed the data of 57 energy and mining companies included in NIFTY500 index at National Stock Exchange of India (NSE) for the period 2016 to 2019. In the present study, environment, social, and governance (ESG) parameters were considered (...) to measure the corporate sustainability disclosure practices. Panel data analysis was conducted to investigate the impact of possible determinants on sustainability reporting. The results indicate that variables, such as firm size, market capitalization, and a standalone sustainability reporting, are positively associated with the sustainability information disclosure of companies. The finding also suggests that policymakers should promote a standalone sustainability reporting based on Global Reporting Initiative (GRI) standards and also broaden the existing scope of business responsibility reporting in India. Overall findings should help the policymakers and regulators to assess and advance the disclosure reforms to improve sustainability reporting in India. (shrink)

This paper examines the impact of integrated reporting on the integration of environmental, social, and governance issues into the business model and the related economic and ESG performance changes. To investigate these internal and external transformational effects of IR, important differences between IR and alternative ESG reporting strategies are worked out. Using three matched samples of companies from around the world for the sample period 2002–2011, IR companies are matched with companies applying no ESG reporting, stand-alone ESG reporting, or ESG (...) reporting in the annual report. The results suggest that IR is a superior mechanism only for the integration of ESG issues into the core business model when comparing IR with the ESG reporting strategies of no ESG reporting and ESG reporting in annual reports. In comparison with, stand-alone ESG reporting, the results indicate that IR is negatively associated with the ESG integration level and with the economic and ESG performance. Moreover, this negative impact is lower for companies that have already implemented ESG management tools prior to the initiation of IR and is stronger for companies residing in countries with legal requirements for the disclosure of ESG information. A separate change analysis reveals that companies do not benefit from a switch from stand-alone ESG reporting to IR. Thus, this paper provides empirical evidence that contradicts the general notion of IR as a superior reporting mechanism, as the benefits of IR are driven by several factors. (shrink)

This article investigates whether sustainability labels for mutual funds in Europe provide consistent signals regarding funds’ sustainable characteristics. Specifically, we assess the alignment of signals conveyed by third-party and self-declared labels. Among the first typology, we consider labels sponsored by government and nonprofit organizations (GNPOs) alongside Environmental, Social, and Governance (ESG) ratings from commercial data vendors. The latter category includes the Sustainable Finance Disclosure Regulation (SFDR) classification and an ESG-related name. Our findings indicate that equity funds with GNPO labels (...) are more likely to exhibit top-tier ESG ratings and alignment with self-declared sustainability signals, namely Article 9 of SFDR and fund names. Furthermore, holding government and multiple GNPO labels is linked to other signals indicating higher sustainability standards. In addition, funds tend to experience an improvement in Morningstar globes after receiving a GNPO label, consistent with GNPO labels signaling funds of the high-quality type. The results regarding label alignment in fixed-income funds are less conclusive. Our findings underscore the need for credible signals in view of the growing number of sustainability labels available to investors. (shrink)

This study examines the impact of non-executive employee stock ownership plans (ESOP) on corporate environmental engagement. We show that granting ESOPs to non-executive employees promotes greater corporate ecological engagement from the perspectives of environmental protection expenditures, environmental information disclosure quality, and environmental, social, and governance (ESG) ratings. ESOPs unite members in a common interest, empowering them to put pressure on management to reduce carbon emissions, which benefits their physical wellbeing and increases their residual interest in long-term corporate wealth. Further, (...) our analysis reveals that companies investing in environmental protection forgo short-term profit as a consequence of high initial costs, while increasing long-term firm value. These positive effects are attributable to ESOP schemes with higher employee subscription rates, those granted to a larger number of non-executive employees, and those with longer validity periods of ownership, whose incentive effect is sufficiently powerful to offset the free-rider problem. In addition, the impact of ESOPs is more pronounced in companies with greater media exposure, those confronting intense labor market competition, and those in heavily polluting industries. Fundamentally, our study provides novel evidence of the incentive effect of ESOPs on corporate environmental engagement and of stakeholder dynamics driving the implementation of carbon reduction strategies. (shrink)

Addressing ESG issues has become a point of interest for investors, shareholders, and governments as a risk management concern, while for firms it has become an emerging part of competitive strategy. In this study, a database from an independent ratings agency is used to examine, longitudinally, how Australian Securities Exchange (ASX) 300 firms are responding to ESG issues. Following institutional theory predictions, ASX300 firms are improving ESG performance over the 2002–2009 timeframe. Furthermore, over this timeframe, performance on the governance dimension (...) improved at a greater rate than environmental or social performance, as predicted. Lastly, high impact industries are predicted to demonstrate overall improved ESG performance relative to medium or low impact industries over the timeframe, but this hypothesis was not confirmed. Results are discussed along with implications and future research directions. (shrink)

The aim of this paper is to investigate the relationship between environmental, social, and governance controversies and firm market value. We use a unique dataset of more than 4000 firms from 58 countries during 2002–2011. Primary analysis surprisingly shows that ESG controversies are associated with greater firm value. However, when interacted with the corporate social performance score, ESG controversies are found to have no direct effect on firm value while the interaction appears to be highly and significantly positive. Building on (...) this evidence, we attempt to explore the channels through which CSP may enhance market value. Conducting sample split analysis indicates that higher CSP score has an impact on market value only for high-attention firms, those firms which are larger, perform better, located in countries with greater press freedom, more searched on the Internet, more followed by analysts, and have an improved corporate social reputation. Thus, our findings provide new insights on the role of firm visibility through which firms can profit from their CSP. (shrink)

This paper provides an examination of some problems caused by the concentration of influence in the capital markets of developed countries. In particular, I argue that large asset managers exercise quasi-political power that is not democratically legitimate. In section two, I will examine the economic driver behind the size and power of the big asset managers: the passive investing revolution. I will discuss several respects in which this revolution has fundamentally changed capital markets, most notably by making a large share (...) of investors universal owners. In the third section, I argue for my central analytical conjecture: asset managers exercise quasi-political power. They use their influence to shape the rules of the game in public capital markets in order to implement social and environmental policies that have traditionally been the exclusive purview of states. “Asset manager capitalism” is a recent term coined to refer to the contemporary system of corporate governance that succeeded the Berle and Means corporation with its dispersed ownership; the argument of this section is that asset manager capitalism is also a new political-economic regime. In the fourth section I defend my central normative claim: asset manager capitalism is an untenable and illegitimate political-economic arrangement, for at least two reasons. First, the power of asset managers is not checked by any institutional constraints, and is not rendered legitimate by any democratic process. More fundamental than this procedural critique is an argument that the interests of asset managers could not be aligned with the public interest, given the fact that the distribution of capital is highly unequal. I conclude by discussing several proposals to reform asset manager capitalism. (shrink)

Heterogeneous institutional investors' shareholding preferences have been driven to change by the deepening of ESG investment philosophy. Therefore, we examine the impact of corporate ESG performance on institutional investors' shareholding preferences and its mechanism of action. We conduct mixed OLS and mediation effect tests using data on ESG responsibility scores and institutional investors' shareholding ratios of A-share listed companies in China from 2010 to 2020 as samples. We find that corporate ESG performance can significantly and robustly increase institutional investors' shareholdings; (...) the mediation effect analysis shows that overall corporate ESG performance contributes to increases in corporate book and market values, thus encouraging institutional investors to increase their shareholdings. The heterogeneity analysis shows that independent institutional investors attach more importance to corporate ESG responsibility performance, and long-term institutional investors attach more importance to corporate environmental performance; moreover, institutional investors have more significant ESG shareholding preferences for Chinese SOEs. Our study can strengthen the encouragement of institutional investors to integrate ESG investment concepts from multiple perspectives, such as research and analysis, portfolio management, risk control, and due diligence management, to design and develop targeted ESG investment tools, give full play to the role of shareholders and guide the sound development of listed companies from the perspective of investment strategy objectives. (shrink)

An updated excerpt from the larger paper AI Human Impact. Excerpt explains why ESG investing requires Updating for the AI economy.

We investigate how conventional asset managers account for environmental, social, and governance factors in their investment process. We do so on the basis of an international survey among fund managers. We find that many conventional managers integrate responsible investing in their investment process. Furthermore, we find that ESG information in particular is being used for red flagging and to manage risk. We find that many conventional fund managers have already adopted features of responsible investing in the investment process. Furthermore, we (...) argue and show that ESG investing is highly similar to fundamental investing. We also reveal that there is a substantial difference in the ways in which U.S. and European asset managers view ESG. (shrink)

Using a sample of US stocks over the period 1991–2019, we test whether stocks with high exposure to a social index exhibit high returns. Using a univariate analysis, our in‐sample results show that stocks with high sensitivities to the MSCI KLD 400 Social Index underperform stocks with low sensitivities by an annual risk‐adjusted performance of 7.02%. The negative premium is also larger in the post‐crisis period of 2007–2019 and is equal to 10.25%. The out‐of‐sample results offer, however, only weak evidence (...) of such a finding, with a risk‐adjusted performance difference of merely −0.84% over the full sample period and no significant differences between the pre‐crisis and post‐crisis periods. In the multivariate regression, we find evidence of a negative relationship between exposure to the social index and stock performance. Moreover, we find that stocks with high exposure to the social index display a low corporate social responsibility score, a high Tobin’s Q, high long‐term debt, a large size, high total risk, a high market beta, a high SMB coefficient, a low HML coefficient, and a small MOM coefficient. (shrink)

We investigate how conventional asset managers account for environmental, social, and governance factors in their investment process. We do so on the basis of an international survey among fund managers. We find that many conventional managers integrate responsible investing in their investment process. Furthermore, we find that ESG information in particular is being used for red flagging and to manage risk. We find that many conventional fund managers have already adopted features of responsible investing in the investment process. Furthermore, we (...) argue and show that ESG investing is highly similar to fundamental investing. We also reveal that there is a substantial difference in the ways in which U.S. and European asset managers view ESG. (shrink)

We draw from resource dependence and institutional theories to explore how board characteristics associated with directors’ capacities to provide resources and legitimacy (i.e., board size, the number of non-executive, interlocking, and female directors) along with regulative, normative, and cultural-cognitive institutional conditions combine to shape firm environmental, social, and governance (ESG) performance. Using a process of configurational theorizing with fuzzy set qualitative comparative analysis and data from firms in 32 countries, we identify multiple equifinal configurations that are associated with high and (...) low ESG performance. We find that high and low ESG performance have different drivers due to complementarities among the presence and absence of board characteristics. Our results also show that the effectiveness (or not) of the bundles of boards’ characteristics for ESG performance varies across institutional contexts. By leveraging these findings to construct a typology of board archetypes that lead to high and low ESG performance, we offer novel theoretical and empirical insights to scholars as well as implications for practice. (shrink)

Most regulations and guidelines require that potential research participants be told a great deal of information during the consent process. Many of these documents, and most of the scholars who consider the consent process, assume that all this information must be disclosed because it must all be understood. However, a wide range of studies surveying apparently competent participants in clinical trials around the world show that many do not understand key aspects of what they have been told. The standard view (...) of the conditions for valid consent therefore implies that these people have failed to give valid consent to research participation. In this paper we argue that the standard view is false. The primary function of the requirement that researchers disclose information about a study is the avoidance of illegitimate control over someone’s consent decision, which is a form of fraud.We derive the content and manner of appropriate disclosure by analysing the ways in which the manipulation of information can invalidate consent. Our analysis shows that the informational requirements for valid consent are conceptually distinct and thus unlikely to have identical contents. This implies that consent can be valid when not everything that ought to be disclosed by the person asking for consent is understood by the person who proffers it. (shrink)

This paper examines whether a firm’s financial performance is associated with superior environmental, social and governance scores in emerging markets of multinationals in Latin America. The study addresses the current research gap on this issue; it develops hypotheses and tests them by applying linear regressions with a data panel drawn from the Thomson Reuters Eikon™ database to analyse data on 104 multinationals from Brazil, Chile, Colombia, Mexico and Peru between 2011 and 2015. The results suggest that the relationship between the (...) ESG score and FP is significantly statistically negative. Furthermore, in examining environmental, social and governance separately to accurately determine each variable’s relationship to multilatinas’ FP, the results reveal a negative relationship. Finally, the empirical analysis provides evidence for a moderating effect of financial slack and geographic international diversification on the relationship between ESG dimensions and firms’ FP. This study furthers understanding of the relationship between ESG dimensions and FP for the Latin American business context. (shrink)

Postmodern political critiques speak of the death of ideology, the end of history, and the postsecular return of religious attitudes, yet radical conservative theorists such as Mark Lilla argue religion and politics are inextricably intertwined. Returning much-needed uncertainty to debates over the political while revitalizing the very terms in which they are defined, María Pía Lara explores the ambiguity of secularization and the theoretical potential of a structural break between politics and religion. For Lara, secularization means three things: the translation (...) of religious semantics into politics; a transformation of religious notions into political ideas; and the reoccupation of a space left void by changing political actors that gives rise to new conceptions of political interaction. Conceptual innovation redefines politics as a horizontal relationship between governments and the governed and better enables societies (and individual political actors) to articulate meaning through action--that is, through the emergence of new concepts. These actions, Lara proves, radically transform our understanding of politics and the role of political agents and are further enhanced by challenging the structural dependence of politics on religious phenomena. (shrink)

We investigate the association between a wide range of community-level environmental, social, and governance (ESG) outcomes and the credit risk of U.S. municipal finance fixed-income securities. We develop a novel dataset of multiple ESG outcomes for U.S. counties and connect it to a 2001-2020 panel of municipal bonds issued within those counties. Overall, we find supportive evidence that collective increases in community-level ESG factors (i.e., ESG outcomes) are associated with reductions in credit risk for U.S. municipal finance instruments over time. (...) We theorize that these associations arise from variations in investor perceptions and manifested changes in fiscal health over time as a function of changing ESG outcomes. Post hoc analyses leveraging quasi-exogenous shocks to uncertainty, as well as connecting ESG outcomes to various measures of fiscal health at the county-year level, and credit ratings at the bond-year level, help validate this theory. Our research suggests that even socially agnostic investors should investigate the environmental and social performance of a municipality as part of their credit due diligence. (shrink)

Most regulations and guidelines require that potential research participants be told a great deal of information during the consent process. Many of these documents, and most of the scholars who consider the consent process, assume that all this information must be disclosed because it must all be understood. However, a wide range of studies surveying apparently competent participants in clinical trials around the world show that many do not understand key aspects of what they have been told. The standard view (...) of the conditions for valid consent therefore implies that these people have failed to give valid consent to research participation. In this paper we argue that the standard view is false. The primary function of the requirement that researchers disclose information about a study is the avoidance of illegitimate control over someone’s consent decision, which is a form of fraud.We derive the content and manner of appropriate disclosure by analysing the ways in which the manipulation of information can invalidate consent. Our analysis shows that the informational requirements for valid consent are conceptually distinct and thus unlikely to have identical contents. This implies that consent can be valid when not everything that ought to be disclosed by the person asking for consent is understood by the person who proffers it. (shrink)

Dieser Quick Guide gibt einen Überblick über Compliance, ESG und Investigations in Emerging Markets im Kontext wachsender Anforderungen wie des deutschen Lieferkettensorgfaltspflichtengesetzes und EU-Verordnungen. Deutsche Unternehmen sind durch neue Regelungen, besonders in Emerging Markets, mit verstärkten Sorgfalts-, Dokumentations- und Berichterstattungspflichten konfrontiert. Dieser Leitfaden beleuchtet diese Herausforderungen und zeigt, wie On-Site Audits effizient durchgeführt werden können. Der Inhalt: Einführung Anknüpfungspunkte: Due Diligence, Supply Chain Compliance, Nachhaltigkeitsberichterstattung, Korruptionsvermeidung Betroffene Kreise: Unternehmen, Tochtergesellschaften, Zulieferer, Dritte Organisation von On-Site Audits Zusammenfassung und Ausblick Die Zielgruppen (...) CEOs, CFOs, Rechtsabteilungsleiter, Compliance-Beauftragte, Beschaffungsmitarbeiter, Rechtsanwälte Die Autoren: RA Dr. Constantin Frank-Fahle, LL.M., Gründungspartner (emltc), spezialisiert auf rechtliche und steuerliche Strukturierung von Auslandsinvestitionen. RA Roland Falder, Counsel (emltc), spezialisiert auf Arbeitsrecht und Compliance Untersuchungen. RA'in Dr. Anna-Luisa Lemmerz, Counsel (emltc), spezialisiert auf Handels- und Gesellschaftsrecht sowie Compliance. (shrink)

Artificial intelligence (AI) governance and auditing promise to bridge the gap between AI ethics principles and the responsible use of AI systems, but they require assessment mechanisms and metrics. Effective AI governance is not only about legal compliance; organizations can strive to go beyond legal requirements by proactively considering the risks inherent in their AI systems. In the past decade, investors have become increasingly active in advancing corporate social responsibility and sustainability practices. Including nonfinancial information related to environmental, social, and (...) governance (ESG) issues in investment analyses has become mainstream practice among investors. However, the AI auditing literature is mostly silent on the role of investors. The current study addresses two research questions: (1) how companies’ responsible use of AI is included in ESG investment analyses and (2) what connections can be found between principles of responsible AI and ESG ranking criteria. We conducted a series of expert interviews and analyzed the data using thematic analysis. Awareness of AI issues, measuring AI impacts, and governing AI processes emerged as the three main themes in the analysis. The findings indicate that AI is still a relatively unknown topic for investors, and taking the responsible use of AI into account in ESG analyses is not an established practice. However, AI is recognized as a potentially material issue for various industries and companies, indicating that its incorporation into ESG evaluations may be justified. There is a need for standardized metrics for AI responsibility, while critical bottlenecks and asymmetrical knowledge relations must be tackled. (shrink)

Harms and risks to groups and third-parties can be significant in the context of research, particularly in data-centric studies involving genomic, artificial intelligence, and/or machine learning technologies. This article explores whether and how United States federal regulations should be adapted to better align with current ethical thinking and protect group interests. Three aspects of the Common Rule deserve attention and reconsideration with respect to group interests: institutional review board (IRB) assessment of the risks/benefits of research; disclosure requirements in the (...) informed consent process; and criteria for waivers of informed consent. In accordance with respect for persons and communities, investigators and IRBs should systematically consider potential group harm when designing and reviewing protocols, respectively. Research participants should be informed about any potential group harm in the consent process. We call for additional public discussion, empirical research, and normative analysis on these issues to determine the right regulatory and policy path forward. (shrink)

Business Ethics, the Environment &Responsibility, Volume 31, Issue 3, Page 604-619, July 2022.

This study seeks to shed light on the effect of star CEOs on the environmental, social, and governance (ESG) performance of Chinese firms. Relying on the theoretical perspective of role identity and role constraints, we analyze data from 1222 Chinese firms listed on the Shanghai and Shenzhen Stock Exchanges from 2006 to 2019. The results analyzed using the ordinary least squares estimate method reveal a positive effect of star CEOs' extreme confidence and legitimacy pressure mechanisms on ESG performance. We also (...) find that this positive relationship is negatively moderated by higher organizational slack but strengthened by a lower level of regional marketization, as the degree of firms' dependence on external stakeholders' resources differs significantly. Additionally, this study finds that ESG activities are less likely to be associated with firm performance if star CEOs pursue them to satisfy their need for star status. These findings supplement the early tests of the influence mechanism of star CEOs on organization-level results and expand the context discussion of role identity and role constraints theory in the Chinese institutional environment. (shrink)

An adolescent’s last moment of life is an emotionally and medically complex time. Children may grapple with understanding the things happening to them and with grief of a future lost; caregivers struggle to simultaneously balance deep sorrow, hope, and love; and healthcare providers fight to maintain sound medical and ethical decision making. Increased discussion regarding adolescent end-of-life care is needed so that clinicians may better understand how to engage in ethically based medical management during these events. This holds particularly true (...) in situations where potentially conflicting ideas exist between clinicians and family members. We describe the case of an acutely and terminally ill adolescent who remained cognitively intact but with rapidly advancing multiple organ failure and whose parents requested that he remain uninformed of his critical illness and prognosis. (shrink)

This study provides an in-depth examination of the relationship between environmental, social, and governance (ESG) performance and the idiosyncratic volatility of Korean companies. In line with the risk-mitigation view, the study finds that strong ESG performance is associated with a reduction in a firm's idiosyncratic volatility. The impact of ESG performance on reducing firm volatility was particularly evident during the COVID-19 pandemic, highlighting the role of ESG performance in risk mitigation during crisis periods. The study also shows that companies with (...) strong ESG performance in industries that are highly sensitive to ESG factors are particularly adept at reducing idiosyncratic volatility. These findings underscore the importance of ESG enhancement for both firm managers and policymakers, particularly within ESG-sensitive industries. (shrink)

Objectives: to assess physicians’ and patients’ views in Saudi Arabia towards involving the patient versus the family in the process of diagnosis disclosure and decision-making, and to compare them with views from the USA and Japan.Design: A self-completion questionnaire was translated to Arabic and validated.Participants: Physicians from different specialties and ranks and patients in a hospital or attending outpatient clinics from 6 different regions in KSA.Results: In the case of a patient with incurable cancer, 67% of doctors and 51% (...) of patients indicated that they would inform the patient in preference to the family of the diagnosis . Assuming the family already knew, 56% of doctors and 49% of patients would tell the patient even if family objected . However, in the case of HIV infection, 59% of physicians and 81% of patients would inform the family about HIV status without the patient’s consent . With regards to withholding ventilatory support, about 50% of doctors and over 60% of patients supported the use of mechanical ventilation in a patient with advanced cancer, regardless of the wishes of the patient or the family. Finally, the majority of doctors and patients were against assisted suicide.Conclusions: Although there was more recognition for a patient’s autonomy amongst physicians, most patients preferred a family centred model of care. Views towards information disclosure were midway between those of the USA and Japan. Distinctively, however, decisions regarding life prolonging therapy and assisted suicide were not influenced to a great extent by wishes of the patient or family, but more likely by religious beliefs. (shrink)

Ensuring confidentiality is the cornerstone of trust within the doctor–patient relationship. However, health care providers have an obligation to serve not only their patient’s interests but also those of potential victims and society, resulting in circumstances where confidentiality must be breached. This article describes the attitudes of mental health professionals when patients disclose past crimes unknown to the justice system. Twenty-four MHPs working in Swiss prisons were interviewed. They shared their experiences concerning confidentiality practices and attitudes towards breaching confidentiality in (...) prison. Qualitative analysis revealed that MHPs study different factors before deciding whether a past crime should be disclosed, including: the type of therapy the prisoner-patient was seeking, the type of crime that is revealed, and the danger posed by the prisoner-patient. Based on this study’s findings, risk assessment of dangerousness was one of the most important factors determining disclosures of past crimes, taking into consideration both the type of therapy and the crime involved. Attitudes of MHPs varied with regard to confidentiality rules and when to breach confidentiality, and there was thus a lack of consensus as to when and whether past crimes should be reported. Hence, legal and ethical requirements concerning confidentiality breaches must be made clear and known to physicians in order to guide them with difficult cases. (shrink)

The present study focuses on the word ‘Kun’ from Quran. In this paper, the discourse of Quran and the conceptual ayah of ‘Kun’ is discussed with reference to exegetical context, the perceptual theory of creation and the reality of the relentless evolution of ‘Kun’ and its possible hermeneutics. The recognition of the ‘intention’ of God has to be unveiled in order to understand the theory of ‘Kun’ and the idea of Creation. The three dimensional design of ‘Kun’ can be seen (...) in the Quran as: the intention of ‘Kun’, when the creation exists in the intention of God; the imagination of God about ‘Kun’, which is the second stage and is related to the imaginable state of the ‘essence’ of ‘Kun’; the final stage refers to the ‘saying’ of ‘Kun’ by God, which unveils the intention of God. The relentless evolution is the reality that every time God says ‘Kun’, it discloses itself with unique creation. The relentless evolution in the perceptual theory of creation of ‘kun’ connects it with the theory of expansion of the cosmos and its evolution. The uniqueness of ‘Kun’ is unveiled in transcendence and immanence through the infinity Himself. (shrink)

As global warming continues to attract growing levels of attention, various stakeholders have put climate change on corporate agendas and expect firms to disclose relevant greenhouse gas information. In this paper, we investigate the consistency of the GHG information voluntarily disclosed by French listed firms through two different communication channels: corporate reports and the Carbon Disclosure Project. More precisely, we contrast the amounts of GHG emissions reported and the methodological explanations provided in each channel. Consistent with a stakeholder theory (...) perspective, we find that GHG amounts are significantly lower in the CR than in the CDP. We also find that firms increase the CR figures’ traceability when there is a discrepancy between disclosures in the two channels. We suggest that the aim of this greater traceability is to enhance information credibility across the different channels used. (shrink)

ESG-transformation is taking place in all areas of the economy. Banks must become examples and guides in conducting business in an environmentally, socially and governance manner. The purpose of the study is to substantiate the need to determine the correct course and implement the principles of ESG-banking, including in the practice of risk management of commercial banks, taking into account the long-term consequences of today's actions for global economic and natural systems. Scientific novelty lies in the development of incentive measures (...) and support for ESG-banking, taking into account the analysis of world experience. As a result, the validity of the introduction of ESG-banking and ESG-risk management, their impact on increasing stability in the country's economic sector has been proved. The article identifies the limitations that are most relevant for the Russian market due to the novelty of the ESG-concept in the domestic banking sector. (shrink)

In the current study, we examine the changes in disclosure practices on compliance and the fight against corruption at Siemens AG, a large German multinational corporation, over the period 2000–2011 during which a major corruption scandal was revealed. More specifically, we conduct a content analysis of the company’s annual reports and sustainability reports during that period to investigate the changes of Siemens’ corruption and compliance disclosure using both quantitative and qualitative methods. Through the lens of legitimacy theory, stakeholder (...) analysis, and organizational façades, we find evidence that Siemens changed its compliance and corruption disclosure practices to repair its legitimacy in the wake of the 2006 corruption scandal. We analyze these strategies more closely by using the rational, progressive, and reputation façades framework. Our primary findings suggest that the annual reports show peaks of disclosure amounts on corruption and compliance disclosures earlier than sustainability reports, which can be partly explained by analyzing the disclosures made about—and to—the different stakeholder groups. We find that the annual report focuses more on internal stakeholders such as employees, while the sustainability report focuses more on external stakeholders such as suppliers. We also find that the company uses the façades differently depending on which report is being analyzed. (shrink)