Are ESG scores affected by the quality of non-financial disclosures?

Chuan Zhang and Yueyun Wang

International Review of Economics & Finance, 2024, vol. 93, issue PA, 1431-1458

Abstract: ESG scores are an important indicator of a company's performance in the areas of environmental, social responsibility and corporate governance, and non-financial information as the basis for a company's ESG score has received increasing attention in recent years. Based on the data of A-share listed companies in Shanghai and Shenzhen from 2007 to 2022, the study finds that disclosing non-financial information that is more similar to that of other companies in the same industry reduces a company's ESG score, while the higher the readability and forward-looking content of the disclosure, the higher the ESG score. Mechanism tests suggest that the act of digital transformation causes firms to disclose non-financial information that affects ESG scores. Other analyses show that higher similarity of non-financial information in non-high-tech firms has a greater impact on ESG scores, while firms with different firm sizes and internal control quality respond differently to ESG scores. This study reveals the characteristics of non-financial information disclosure in detail, enriches the related research on the influencing factors of ESG scores, provides theoretical support and practical value for the principles and directions of non-financial information disclosure of listed companies, and provides ideas and directions for the vigorous development and improvement of ESG scores.

Keywords: Non-financial information; ESG score; Digital transformation; For-ward looking; Readability (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:93:y:2024:i:pa:p:1431-1458

DOI: 10.1016/j.iref.2024.03.070

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