ESG Disclosure Quality and Firm Value: Focused on Managerial Characteristics

Abstract

[Purpose]This study aims to examine the effect of the quality of Environmental, Social, and Governance (ESG) report disclosures on the capital market by reducing information asymmetry. [Methodology]Regression analysis including 2SLS analysis was conducted for 326 (company-year) observations of 55 companies that continuously disclosed ESG reports from 2016 to 2021. [Findings]The results are as follows. First, the quality of ESG report disclosures was found to positively enhance corporate value. Second, no significant results were found for Hypothesis 2, and Hypothesis 3, which suggested the interaction between the importance of ESG report disclosure quality and management characteristics could either increase or decrease corporate value, was not confirmed. Similar results were also identified in the Two-Stage Least Squares (2SLS) analysis conducted to address endogeneity. [Implications]The conclusion drawn from this research confirmed that the quality of ESG report disclosures improves market evaluations. This study contributes to the literature by being the first to directly investigate mechanisms aimed at enhancing the reliability of ESG reports, providing new evidence on the market response to the quality of ESG report disclosures. The evidence provided in this study can contribute to the expansion of related research.