Exploring the Impact of Information Environment on ESG Disclosure Behavior: Evidence from National Pensions and Foreign Investors
By Jong Won Choi, Suk Hyun & Ju Hyoung Park
This study examines the impact of institutional investors on the environmental, social, and governance (ESG) disclosures of Korean companies listed on Bloomberg from 2011 to 2020. We find that while institutional investors encourage general ESG disclosure, they do not influence materiality-based ESG disclosure. Interestingly, materiality-based ESG disclosures decrease when institutional investors are major shareholders, suggesting a potential decline in disclosure quality. The study also finds a positive relationship between materiality-based ESG disclosures and firm value, with lower materiality-based rates being associated with lower firm value. It also finds a positive relationship between ESG disclosure and ESG performance but indicates that lower materiality-based ESG disclosure is associated with higher ESG performance, suggesting a potential gap in ESG rating agencies’ assessment of disclosure quality. The findings, confirmed by qualitative and factor analyses, provide important insights into the design of ESG disclosure policies and contribute to the understanding of the role of institutional investors in shaping the information environment
Source @SSRN
