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... Harymawan, Nasih, et al. (2020) shows that Indonesian and Malaysian firms are efficaciously enhancing their corporate images in the form of share value as they adopt assurance services on their ESG reporting. Correspondingly, another study documents carbon disclosure's merit in the form of a firm's value increases (Harymawan, Rahayu, et al., 2020). ...
This article examines the relationship between investment efficiency (INVEFF) and environmental, social, and governance (ESG) reporting. We posit corporate integration management (CIM), which is reflected by the level of INVEFF, is a crucial driver for the better quality of ESG reporting. But there is a second possibility which ESG reporting is viewed as a different firm's burden, and therefore, it is a form of inefficiency. We test our hypothesis in Indonesia's unique setting of nonfinancial listed firms from 2010 to 2018. We find that INVEFF is confirmed as one of the critical drivers for enhancing ESG reporting quality. Our result is consistent during several robustness checks. Furthermore, we document that a positive relationship between INVEFF and ESG reporting is not incurred in all circumstances. Our study is one of few studies that focus on quantitative measurement of CIM and examines its relationship with ESG reporting.
... Another study documents that firms with audited ESG reporting in Malaysia and Indonesia tend to have higher firm value than non-audited ESG reporting [42]. Another relevant study examines one of the sub-topics of ESG reporting, the carbon disclosure, and finds that higher quality of carbon disclosure leads to better firm performance [43]. These studies conclude that ESG reporting will assist the management in identifying and exploiting its competitive advantage, thus enhancing its performance. ...
... Thus, in financially distressed firms' context, it is not merely that management does not experience ESG reporting benefit, rather they did not have that alternative to implement. Moreover, there is study that argues that the low financial distress risk of ESG-oriented firms may not be derived from its ESG reporting, instead it is coming from an extensive amount of resources that they control [43]. ...
This study examines the relationship between financial distress and environmental, social, and governance (ESG) disclosure. We hypothesize that financially distressed firms are tempted to enhance ESG disclosure as it provides higher performance in terms of financial and market perspectives. ESG disclosure needs substantial resources, which financially distressed firms may not be able to provide. In Indonesian settings, we find that financially distressed firms have lower ESG disclosure quality than non-distressed firms. Our results are robust due to lagged variable, Heckman’s two stages, and coarsened exact matching regression showing consistent results. Furthermore, our results are consistent with three years of rolling windows of financial distress and all sections of ESG reporting, except the general information section. This study extends the scope of prior studies by focusing on firms’ eagerness to provide higher quality ESG disclosure, particularly distressed firms.
