ESG Disclosure in an Emerging Market: An Empirical Analysis of the Influence of Board Characteristics and Ownership Structure

Abstract

In the context of greater demand for corporate transparency, there is a growing pressure on boards to produce and communicate information to their investors and stakeholders. The current literature on integrated reporting shows that the provision of ESG information is a crucial factor that improves corporate governance by reducing agency problems. This issue is also critical in emerging economies, and particularly among Latin American firms. The concentration, opacity, and lack of evidence about ESG disclosure in less developed financial markets provide a promising environment to study the implications of board heterogeneity and ownership structure on strategic corporate decisions such as the disclosure of ESG indicators in developing economies. Using Tobit panel data models, we study how these factors affect the extent of ESG disclosure by Chilean listed firms. Our main results suggest that a board’s independence and gender diversity positively influence the extent of disclosure of ESG indicators. Our evidence helps firms concerned with strengthening their board’s features, investors that require screening firms’ ESG risk factors, and supports regulators’ decisions on setting norms regarding the extent of disclosure of ESG information by firms.

Women board members’ impact on ESG disclosure with environment and social dimensions: evidence from the European banking sector

“…Moreover, seven of these banks are in the category of global systematically important banks (G-SIB), thus confirming the relevance of the sample within the European financial environment. In ESG disclosure, variables such as countries’ perspectives, development levels and labor market status level have an important effect (Reverte, 2009; Ioannou and Serafeim, 2017; Baldini et al , 2018; Zaman et al , 2020; Lavin and Mentecinos-Pearce, 2021), so we wanted this study was limited to European banks to avoid any bias related to different policy measures imposed by different countries.…”

Sustainability (Is Not) in the Boardroom: Evidence and Implications of Attentional Voids

“…For example, Hillman et al [33] found that stakeholder representation on the board in not associated with stakeholder performance, while Kock et al [24] found that having more stakeholders on the board improves a firm's environmental performance. The proportion of independent directors has been linked to greater attitudes towards environmental protection [39], a greater degree of CSR and ESG disclosure [10,40] and better environmental performance [23,34]. Foreign boards have also been shown to engage in more CSR activities [41].…”

“…Second, a large body of literature has also emerged around the composition of the board of directors in relation to a firm's ESG practices. In general, although not always [35,45], female directors tend to have a more positive influence on a firm's social and/or environmental policies, practices, and performance overall [10,23,28,34,39,40,[46][47][48][49][50]. For example, Jizi [10] found that female participation on boards is not only positively related to CSR engagement and reporting, but also to implementing specific social and environmental policies, such as energy efficiency, green building, and climate change policies.…”

“…For example, Jizi [10] found that female participation on boards is not only positively related to CSR engagement and reporting, but also to implementing specific social and environmental policies, such as energy efficiency, green building, and climate change policies. Similarly, the more gender-diverse a board is, the more positive the association with a firm's ESG scores [28] and ESG disclosures [40], and the lower the firm's environmental emissions [44,49], the greater the degree of environmental innovation [51] and the better its environmental performance [34,47,52,53]. Other demographic factors, such as a director's legal [23] or financial [39] background, have also been linked to better attitudes towards environmental protection and/or CEP, while age has not [52].…”

Impact of corporate governance on environmental, social, and governance disclosure: Any difference between financial and non‐financial companies?

“…In the literature, the study of Lavin and Montecinos-Pearce (2021) is the only one that considers both ownership and board of directors' variables and reveals that their impact on ESG disclosure is non-significant. This study included all Chilean listed companies without differentiating between financial and non-financial companies, while financial companies should be analyzed separately, as they are under the specific regulations of the Central Bank.…”