Nexus between mandatory ESG disclosure regulation and abnormal stock returns: a study of an emerging economy

IF 1.3 Q1 LAW
Rajesh Desai
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引用次数: 0

Abstract

Purpose

This study aims to study the response of the stock market to the announcement of compulsory environmental, social and governance (ESG) disclosure regulation in the context of the Indian economy – one of the largest emerging economies. The study also examines the role of carbon sensitivity and pre-ESG disclosure.

Design/methodology/approach

Daily stock price data of 940 listed companies has been collected for 276 trading days to compute abnormal returns. The current study is based on event study methodology to analyze the announcement effect of disclosure regulations. Furthermore, to check the robustness of results, cross-sectional regression has been applied to correct for potential heterogeneity.

Findings

Results of the event study signify that the equity share market has reacted positively and significantly to the mandatory ESG disclosure regulation. Furthermore, the study also confirms the mitigating role of carbon sensitivity and pre-ESG disclosure as carbon nonsensitive (non predisclosure) firms have witnessed a more intense effect of regulation as compared to sensitive (predisclosed) corporations.

Practical implications

Current findings assist managers in understanding investor perception toward nonfinancial disclosures. Corporate managers can use disclosure as a tool to enhance the firm value and reduce information asymmetry by providing relevant information. Furthermore, policymakers can use the findings of present research to disseminate the advantages of adopting ESG disclosure practices thereby improving the transparency and governance among business firms.

Originality/value

To the best of the author’s knowledge, this study is the first to provide empirical evidence on the market response to compulsory ESG disclosure framework in the emerging context of India. Furthermore, considering the infancy stage of ESG research, the present research contributes to the body of knowledge by empirically testing the disclosure theories.

强制性ESG披露法规与股票异常回报的关系:一个新兴经济体的研究
本研究旨在研究在最大的新兴经济体之一印度经济背景下,股票市场对强制性环境、社会和治理(ESG)披露监管公告的反应。该研究还考察了碳敏感性和esg前披露的作用。设计/方法/方法收集940家上市公司276个交易日的每日股价数据,计算异常收益。目前的研究是基于事件研究的方法来分析披露法规的公告效应。此外,为了检验结果的稳健性,采用了横断面回归来校正潜在的异质性。事件研究的结果表明,股票市场对强制性ESG披露规定做出了积极而显著的反应。此外,研究还证实了碳敏感性和预esg披露的缓解作用,因为碳不敏感(非预披露)的公司比碳敏感(预披露)的公司受到更强烈的监管影响。当前的研究结果有助于管理者理解投资者对非财务披露的看法。企业管理者可以将披露作为一种工具,通过提供相关信息来提升企业价值,减少信息不对称。此外,政策制定者可以利用现有的研究结果来传播采用ESG披露实践的优势,从而提高企业的透明度和治理。原创性/价值据作者所知,本研究首次提供了印度新兴背景下市场对强制性ESG披露框架反应的实证证据。此外,考虑到ESG研究尚处于起步阶段,本研究通过对披露理论的实证检验,为ESG研究的知识体系做出了贡献。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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来源期刊
CiteScore
3.90
自引率
6.70%
发文量
13
期刊介绍: The International Journal of Law and Management is a leading journal addressing all aspects of regulation and law as they impact on organisational development, operations and leadership. Organisations and their leaders operate in an increasingly complex world of emerging regulation across national and international boundaries. The International Journal of Law and Management seeks to acknowledge the dynamics of that environment and provide a platform for articles and contributions to stimulate scholarly debate in the development of law and practice. The International Journal of Law and Management seeks to present the latest research on policy, practice and theoretical perspectives and their impact on the development and leadership of organisations. Contributions of a multi-disciplinary nature are welcome. Coverage includes, but is not limited to: -Employment and industrial law- Corporate governance and social responsibility- Intellectual property- Corporate law and finance- Insolvency- Commercial law and consumer protection- Environmental law- Taxation- Competition law- Regulatory theory
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