Sustainability Reporting and Market Uncertainty: The Moderating Effect of Carbon Disclosure

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: St Andrews Business School, University of St Andrews, The Gateway, North Haugh, St Andrews KY16 9RJ, UK

Sustainability, 2024, vol. 16, issue 13, 1-18

Abstract: This research examines how ESG disclosure influences market uncertainty through carbon disclosure. It uses a 10-year dataset from 2012 to 2021 of non-financial U.K. companies in the FTSE All-Share index. This study employs four regression methods to scrutinize the interplay between ESG disclosure, carbon disclosure, and market uncertainty. The research findings uncover a notable reduction in market uncertainty associated with ESG disclosure, aligning with the Information Asymmetry Theory. Interestingly, this study also uncovers that carbon disclosure amplifies this negative relationship, a finding that resonates with the Signaling Theory. These results hold true across various measures of ESG and market uncertainty. This study enriches the sustainability reporting literature with implications for theory and practice. It extends Information Asymmetry and Signaling Theories to U.K. non-financial firms, emphasizing the need for more research on sustainability disclosure. It underscores the role of ESG and carbon disclosure in reducing cost of capital, enhancing firm value, and boosting investor confidence. It calls for transparent ESG reporting by managers, regulatory promotion of such disclosures, and stakeholder utilization of these to evaluate a firm’s impact and contribution to the SDGs, fostering collaboration on sustainability. This study offers key insights for stakeholders such as managers, investors, regulators, researchers, policy makers, and educators in the realm of sustainability reporting and market dynamics.

Keywords: ESG disclosure; carbon disclosure; market uncertainty; Information Asymmetry Theory; Signaling Theory (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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