Does Capital Expenditure Matter for ESG Disclosure? A UK Perspective

Ahmed Saber Moussa () and Mahmoud Elmarzouky
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Ahmed Saber Moussa: Customs Authority, Ministry of Finance Egypt, Nasr City 11635, Cairo, Egypt
Mahmoud Elmarzouky: Aston Business School, Aston University, Birmingham B4 7ET, UK

JRFM, 2023, vol. 16, issue 10, 1-19

Abstract: This study examines how capital expenditure (capex) affects Environmental, Social, and Governance (ESG) reporting and how corporate governance moderates this effect. We use data from non-financial firms in the FTSE All Share index from 2012 to 2021 and measure ESG disclosure with the Bloomberg ESG Disclosure Score, capex with logarithm of the ratio of capital expenditure to total assets, and corporate governance with a composite index based on Board Size, Independent Board, Board Diversity, and Audit Committee Non-Executives. We also examine the non-linear and threshold effects of capex on ESG disclosure with spline regression models. We find that capex is positively linked to ESG disclosure and that this association is robust for firms with better corporate governance. Our findings imply that capex improves ESG performance and impact and that corporate governance enables ESG communication to stakeholders. Our research advances the existing literature by revealing the link between capex, governance, and ESG reporting in a dynamic and uncertain environment. Our study holds practical significance for companies, investors, and regulators who want to incorporate ESG factors into capex decisions and reporting.

Keywords: capital expenditure; ESG disclosure; stakeholder theory; resource dependence theory; principal component analysis (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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