The influence of ESG information on investment allocation decisions

Abstract

Purpose In addition to financial reporting, more and more companies report environmental, social and governance (ESG) information in emerging countries. This practice is intended to fulfill the information needs of all the company’s stakeholders, and more specifically the investors. The purpose of this paper is twofold. First, to analyze whether investors include ESG information into their investment allocation decisions in Tunisian capital market. Second, to identify the information dimension having the more effect on their investment allocation decisions. Design/methodology/approach A field experiment was conducted in an emerging country (Tunisia) among 245 novices and experienced financial stakeholders to analyze how ESG information is taken into account in their investment allocation decisions. Findings The results of the factorial mixed analysis of variance show that ESG information influenced the investment allocation decisions in Tunisia. In addition, the results of the post-hoc test indicate that governance and social information had more influence than environmental information. Research limitations/implications This paper is limited to the analysis of the influence of ESG information only on the decisions of financial stakeholders in Tunisia. In future research works, it will be relevant to study the decisions of other stakeholders and to carry out comparative studies between several countries. Practical implications The results can only strengthen and motivate companies to pay more attention to their ESG information disclosure practices. They are also likely to attract the attention of the accounting standard setters on the need to standardize these practices. Originality/value The original contribution of this paper lies not only in the analysis of three dimensions of extra-financial information: E, S and G through an experiment carried out in an emerging country, but also especially in the comparison of the influence of each dimension on investment allocation decisions.

Composition of Commissioners and Directors, Profitability, Capital Structure and Investor Investment Decisions: Role of Sustainable Investment

“…Investor Investment Decision (KI) is positively and significantly influenced by Sustainable Investment (SI) of 40.2%. This result is in line with research [30] which found that investors do sustainable investments in making investment decisions based on ESG information of the relevant company. In line with the results of the study [5], which revealed that investors also used ESG information in determining their investment decisions.…”

“…The research of [40] found that CSR disclosure has a direct effect on investors' reactions in making investment decisions and there is a mediating relationship between company size, media exposure, and industry sensitivity to investor reaction. Research conducted [30] also found that investors make sustainable investments in making investment decisions based on ESG information of related companies. Besides, most millennial investors prefer to make sustainable investments over conventional investments [15].…”

“…[43] also revealed that ESG by companies is the best choice for investors and portfolio managers in allocating assets to sustainable investments and reducing market risk. Research [30] also found that investors make sustainable investments in making investment decisions based on ESG information of related companies. Therefore, the hypothesis is proposed: H7: Investor investment decision is positively influenced by sustainable investment.…”

The relationship between the Covid-19 media coverage and the Environmental, Social and Governance leaders equity volatility: a time-frequency wavelet analysis

“…Kaiser and Welters (2019) find that the ESG-wise investments result in risk-mitigating effects on momentum portfolios. Khemir, Baccouche, and Ayadi (2019) investigate the influence of ESG information on investment allocation decisions in emerging economies. Jang et al (2020) analyse the relationship between ESG scores and bond returns and suggest that credit rating agencies should consider ESG scores in their rating processes.…”

Accounting for economic sustainability: environmental, social and governance perspectives

“…The influence of ESG information on investment allocation decisions: an experimental study in an emerging country Looking at the importance of ESG information from a country specific context on Tunisia, Khemir et al (2019) conduct a large-scale field experiment. Following Frimousse et al (2006), who claim that unlike financial communication, communication on social performance of Tunisian companies seems marginal, and Chakroun (2013), who show that voluntary disclosure policy in annual reports of Tunisian firms is seen by analysts as being minimalist; the authors' work shows that indeed, ESG disclosure has become more and more important for investment decisions in Tunisia, and they find that governance and social information has an even greater influence than environmental information when it comes to investments in this specific region.…”