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Does top executive gender diversity matter for the value relevance of ESG controversies? Empirical evidence from European tech firms
Abstract
Purpose
Interest in environmental, social and governance (ESG) controversies is acquiring great relevance in the business and academic communities. Nonetheless, previous studies in the area have devoted little attention to how the market views ESG controversies. Against this backdrop, this paper aims to investigate whether ESG controversies are value-relevant to investors, as reflected in equity values. It also investigates whether top management team (TMT) gender diversity is likely to affect the association between ESG controversies and equity market values in the context of high-tech firms.
Design/methodology/approach
This paper uses a sample of high-tech firms listed on the STOXX 600 index during the period 2006–2022. The ESG data for the sample is retrieved from the Refinitiv Eikon database. This paper adopts a fixed-effect panel regression to test the hypotheses.
Findings
Based on the Ohlson’s (1995) valuation framework, the authors find evidence that ESG controversies are associated with a lower market valuation, suggesting that shareholders perceive ESG controversies as conveying negative information about future performance. The authors also find evidence that TMT gender diversity negatively moderates the relationship between ESG controversies and equity values, indicating that TMT gender diversity alleviates the detrimental effect of corporate controversies. These results remain consistent when using the return model of Easton and Harris (1991).
Originality/value
This paper throws more light on the economic consequences of ESG controversies in European high-tech firms. This is particularly important due to the increasing importance of ESG criteria in guiding investment choices. This paper also adds to the current literature by providing new evidence that the value-relevance of ESG controversies is affected by TMT gender diversity.
... As financial markets become increasingly complex and interconnected, the demand for high-quality accounting information that accurately reflects a firm's economic reality has grown [1]. This topic has gained substantial interest among researchers, particularly in the context of corporate governance and the role of board, CEO, and audit committee chairman busyness [2]. Effective corporate governance mechanisms are essential to increase transparency, accountability, and the integrity of financial reporting [3]. ...
... The selection of the GLM method is due to its efficacy in managing residual patterns, variance fluctuations, and non-stationarity, which ensures more accurate results [59]. This methodological choice contrasts with earlier studies e.g., [2,[60][61][62] that applied Ordinary Least Squares (OLS) regression. OLS may lead to biased and inefficient outcomes if there are violations in assumptions like residual normality and homoscedasticity. ...
... p < 0.01) and EPS (r = -0.568, p < 0.01), reinforcing the negative impact of financial losses on market valuations [2,101,114]. ...
This study investigates the impact of board, CEO, and audit committee chairman busyness on the value relevance of accounting information in Saudi listed firms from 2018 to 2022. Utilizing a data of 125 Saudi firms, the research investigates how the busyness of these key governance figures influences the relevance of earnings per share (EPS) and book value per share (BVPS). The findings reveal that board and audit committee chairman busyness significantly enhance the value relevance of EPS, suggesting that their broader networks and strategic oversight improve financial reporting. Conversely, CEO busyness negatively affects the value relevance of BVPS, indicating that divided attention and reduced managerial oversight hinder performance monitoring. These results underscore the dual roles of governance figures and their influence on financial reporting quality. These results highlight the dual effects of governance busyness on financial reporting quality. The study provides novel insights into an emerging market context, offering practical recommendations for policymakers and corporate leaders in line with Saudi Arabia’s Vision 2030. It emphasizes the need for regulatory frameworks to manage director workloads, ensuring enhanced financial reporting and governance effectiveness.
... We contribute to the recent debates on gender diversity in leadership roles and its impact on ESG controversies (e.g., Brinette et al., 2023;Issa & Hanaysha, 2023;Al-Hiyari, 2024). While most prior research has focused on the effect of female leadership on corporate performance or decision-making, we specifically link female CEOs to a reduction in ESG controversies. ...
... Gender diversity ensures effective corporate governance and oversight: firms with female CEOs and a critical mass of female directors are likelier to adopt robust ESG practices. Indeed, prior research has shown that firms with gender-diverse boards of directors showed better capabilities to manage firms against ESG risks (Issa & Hanaysha, 2023;Al-Hiyari, 2024), thus reducing scandals and boosting their corporate reputation. Besides, females in leadership roles bring different points of view and ways of problem-solving, which may eventually lead to more innovative and resistant business strategies. ...
This study examines the impact of chief executive officer (CEO) gender on environmental, social and governance (ESG) controversies among publicly listed non-financial firms in the USA from 2018 to 2023. The results show that firms led by female CEOs experience significantly fewer ESG controversies. In addition, the findings reveal that the mitigating impact of female CEOs on ESG controversies is more pronounced in firms with a critical mass of women directors and a female voice in corporate boards, creating an optimal environment for ethical and socially responsible practices, thereby reducing ESG controversies.
Purpose - This study examines the impact of board gender diversity (BGD) and sustainability committees (SC) on ESG controversies, aiming to assess the effectiveness of these governance mechanisms in mitigating ESG risks.
Design/methodology/approach - The study used panel data from 2,812 non-financial US publicly listed firms between 2018 and 2023. To ensure robust results, various estimation techniques were employed, including alternative measures, the Heckman two-stage model to address potential self-selection bias, and the 2SLS method to tackle endogeneity concerns.
Findings - The results indicate that both BGD and SC negatively and significantly impact ESG controversies. Firms with greater gender diversity on their boards and established SC are less likely to face ESG controversies. In addition, the study found that the interaction effects of BGD and SC are more effective in reducing ESG controversies than either mechanism alone.
Practical implications - Firms that prioritize gender diversity on their boards and have active SCs manage ESG risks more effectively. Investors should consider these factors when evaluating potential investments, as such firms are likely to offer better long-term performance and stability. By focusing on firms with strong ESG practices, investors can mitigate risks associated with ESG controversies and enhance the overall resilience of their investment portfolios.
Social implications - By highlighting the role of gender-diverse boards and SC in mitigating ESG controversies, this study supports broader societal goals of gender equality and responsible business conduct. This aligns with Sustainable Development Goal (SDG) 5 (Gender Equality) by advocating for increased female representation in leadership roles and SDG 12 (Responsible Consumption and Production) by encouraging sustainable practices in business operations.
Originality/value - This study provides new insights into the effects of BGD and SC on ESG controversies, offering valuable guidance for policymakers and business leaders seeking to enhance corporate governance and sustainability.
This study investigates the impact of ESG controversies on the performance of publicly listed firms in the ASEAN‐5 countries with the moderating effect of board gender diversity and sustainability committees. By employing random‐effects regression, this study examines 1414 observations covering 2017 to 2023. Besides, a two‐step GMM and 2SLS regression were used to address the endogeneity problem. The results found a significant negative relationship between ESG controversies and firm performance, implying that firms with fewer ESG controversies have higher performance. Besides, board gender and sustainable committees contribute to reducing the intensity of ESG controversies, which subsequently improves corporate reputation and hence their performances. This outcome presents policymakers with recommendations on how to develop regulations concerning ESG controversies, board gender diversity, and sustainability committees. This study is among the first that highlights the role of board gender diversity and sustainability committees in the context of ESG controversies and firm performance in the region of ASEAN.
The environmental, social and governance (ESG) controversies, defined as a bad behavior which calling into question the commitment to the firm under the media and capture the attention of investors causing conflicts with sustainable business practices, has received increasing attention from academics of several fields. A literature review methodology is used to reviews articles selected from the Scopus and Web of Science databases from 2018 to 2024. Using the Preferred Reporting Items for Systematic Reviews and Meta‐Analyses (PRISMA) guidelines and the bibliometric techniques, with the goal of mapping the intellectual landscape of the field and indicating the key issues shaping its current development. This paper is to conduct quantitative bibliometric analysis with several research factors, such as authors, citations, journals, countries, and regions, using techniques with improve the visualization of bibliometric analysis. Furthermore, this review provides a conceptual framework of the ESG controversies to obtain their drivers and reveal the consequences companies face after ESG controversies. This manuscript concludes by discussing implications of the literature analysis and providing some opportunities for future research. This research provides to the understanding of the ESG controversies context and shows insights for future lines of research.
The challenges of global warming, resource depletion, and environmental protection require immediate action from corporations, governments, and communities globally. Implementing environmental, social, and governance (ESG) measures represents a key strategy for corporations in addressing sustainability concerns. This study investigates how the ESG performance of publicly listed companies in China is influenced by employee stock ownership plans (ESOPs). Utilizing a dataset covering 4,464 publicly listed Chinese corporations from 2009 to 2022, this analysis employs fixed-effects regressions to reveal the beneficial impact of ESOPs on corporate ESG ratings. A firm’s transition from non-ESOP to ESOP status raises ESG ratings by 1.213, representing 22% of the ESG score’s standard deviation. The findings indicate that greater involvement of the top management team in an ESOP weakens the positive impact of the ESOP on corporate ESG performance. The positive impact of ESOPs on ESG performance is insignificant in the agriculture sector but more pronounced in the manufacturing and service sectors, where the transition to ESOP status results in ESG score increases of 1.122 and 1.500, respectively. The issue of endogeneity is addressed by utilizing a lagged ESOP independent variable and applying two-stage least squares regression with the average ESOP serving as the instrumental variable. The findings confirm that causality runs from ESOP to ESG rather than ESG influencing ESOP. AcknowledgmentThis study was supported by the Department of Education of Zhejiang Province – General Program (Y202249981, Y202353438), the Wenzhou Association for Science and Technology – Service and Technology Innovation Program (jczc0254), the Wenzhou-Kean University Student Partnering with Faculty Research Program (WKUSPF202404, WKUSPF202411), the Wenzhou-Kean University International Collaborative Research Program (ICRP2023002, ICRP2023004), and the Wenzhou-Kean University Internal Research Support Program (IRSPG202205, IRSPG202206).
Purpose
This study aims to investigate the relationship between board gender diversity and environmental, social and governance (ESG) controversies and to determine if a critical mass of female directors has a significant impact on ESG performance.
Design/methodology/approach
The study analyzes a sample of non-financial companies from 13 European countries between 2004 and 2021. The primary method used to reach conclusions was the pooled ordinary least squares regression. Additionally, the study used supplementary techniques such as alternative measurement, sub-sample analysis and two-stage least squares to enhance its reliability.
Findings
The results indicate that a higher representation of women on boards is correlated with a reduction in the number of ESG controversies, particularly when there are three or more female directors. Furthermore, the relationship between board gender diversity and ESG controversies may be affected by factors such as industry, governance and a company’s environmental performance.
Practical implications
This study suggests that increasing women’s representation on boards may mitigate ESG controversies and improve firm reputation and performance, especially in industries with high ESG risks. Policymakers can support this through policies, targets, training and inclusive practices. The findings also inform investors and stakeholders of the relationship between board gender diversity and ESG controversies.
Originality/value
This study expands the understanding of the relationship between board gender diversity and sustainable accounting and finance. It focuses on the effect that having female board members has on corporate policies, which is significant for shaping global policies that promote diversity on boards.
This paper examines the value relevance of ESG scores (environmental, social and governance) before, during, and after tumultuous economic periods (including the 2008 financial crisis and the COVID−19 pandemic) taking into consideration a company’s financial performance. The analysis, using Ohlson’s price model, is based on a sample of companies listed on European stock exchanges from 2003 to 2021. The results underline that, after each tumultuous economic period, there was a decline in the value relevance of ESG scores and an increase in investor focus on company financial performance.
This study investigates whether, when, and how media coverage of environment, social, and governance (ESG) controversies, type of media reach, and media severity affects firm value in India's emerging and developing market. By anchoring enacted sensemaking theory with agendasetting theory and attribution theory, we offer the first investigation of how firm value is
impacted by the reach and severity of ESG controversies in the context of voice and accountability (VA). Drawing on a comprehensive dataset for 2007–2016, this study reveals the critical condition
for ESG controversies to impact firm value. The media coverage of ESG controversies decreases firm value only when the media reach is high, as high reach has a more distributable
capacity and greater situated cognition magnitude. On the other hand, media coverage could enhance firm value when the severity is high, as higher severity results in sensemaking intensification
that lowers crisis severity. Upon reflection on these results, our study reveals that the fundamental media machinery expected to control ESG controversies is possibly much more fragile than formerly understood. Therefore, mere media reporting of ESG controversies does not overtly lead to stakeholders' sanctions and valuation effects.
Environmental, social, and governance (ESG) performance has attracted debates of regulatory bodies and the academic community. Previous studies highlighted the relationship between corporate social responsibility (CSR) disclosure index and earnings management (EM) for non-financial firms. In this paper, we examine the relationship between the ESG performance and EM practices for a sample of US commercial banks over the period 2010–2019. We use two proxies for earnings management: abnormal loan loss provisions (ALLP) and EM to meet the threshold of reporting small positive profit or avoiding losses (SPOS). Consistent with the transparent financial reporting hypothesis, we find that banks reporting higher ESG performance are less likely engaged in income-increasing practice through ALLP. However, no evidence supports that ESG score mitigates EM through loss avoidance. Furthermore, we disaggregate the ESG score into its main three components: environmental, social, and governance. Our findings show that the governance pillar effectively mitigates EM practice under its two proxies. Specifically, the social pillar also seems to be an efficient constraint of banks’ EM through income-increasing abnormal loan loss provisions and loss avoidance activity. However, no supporting evidence of a mitigating role for the environmental pillar is provided. Taken together, our results show that, except the environmental pillar, ESG performance score acts as an efficient mitigating tool for EM practices for US banks. Our findings provide a better understanding of banks’ earnings management practices. Our findings are helpful for managers when undertaking long-term investment strategies in ESG reporting practices, regulators when issuing new standards, and banks’ stakeholders when assessing both the financial and non-financial performance of such entities.
Corporations have been involving in controversies through violation, unhealthy competitions, negligent behaviors, and scandals which result in huge financial and non-financial losses. Therefore, this paper investigates the nexus between ESG performance and corporate controversies and the moderating effects of the skillful board on this nexus with respect to public firms in South Africa. Using a sample of 958 firm-years observations with available ESG data from the Thomson Reuters Eikon database as listed in the Johannesburg Stock Exchange (JSE) during the period 2010-2019, we find that ESG performance practices are positively and significantly related to corporate controversies, indicating the likelihood of using ESG practices as 'greenwashing mechanism' by managers which eventually fuels corporate controversies instead of mitigating them. Much more interesting, the result revealed that the existence of board members with specific skills relating to ESG in the corporate boards would likely weaken attempts of managers in the opportunistic implementation of ESG practices, thereby reducing corporate controversies. Our results have interesting implications for stakeholders, regulators, and scholars who may consider ESG as a shield used opportunistically by managers to cover up irresponsible ESG activities. In addition, the empirical findings highlight the importance of skillful board members in moderating the ESG-corporate controversies nexus.
Purpose: Gender diversity, or in-diversity, has long been a problem in the tech industry. Until now, significant gaps and barriers still exist. This paper examines how recruitment practices within the technology sector can contribute to gender inequality and how recruitment practices can be improved to support a gender-diverse organization.
Design/methodology/approach: This paper adopted library research and case study as papers' methodologies.
Findings: There are many benefits of gender diversity, including better performance, better financial returns, and lower volatility. However, most tech companies do not make diversity a priority, and usually display conscious or unconscious gender biases. Some of the recommendations to overcome this diversity issue are to make diversity a goal, offer unconscious bias training, and expand recruitment efforts.
Practical implications: The findings imply that companies not pursuing a diverse workforce are in danger of experiencing lags in innovation and could be left behind. The findings also show that a technology company can increase the diversity of the company's workforce by applying practices that have already proven to be successful.
Originality/value: This paper confirms that gender parity is not just a social mission nor is gender parity solely a public relations initiative to improve a company's image. Technology companies must be continually innovating to thrive in companies' highly competitive and rapidly changing industry.
In recent years, the importance of audit quality has garnered significant attention by managements, academics and the general public. In this study, we examine the relationship between Big N auditors and earnings quality in the Middle Eastern and North African (MENA) countries, where cultural and institutional contexts are quite different from those in Western countries. In addressing this issue, we employ three audit quality metrics-value relevance, abnormal accruals and earnings persistence-and use the propensity score matching technique to deal with the potential endogeneity arising from the nature of external auditor choices. Contrary to the view that Big N auditors supply quality-differentiated audits, the results obtained employing a crosscountry sample of publicly listed non-financial firms of 10 MENA countries during 2009-2019 provide evidence that Big N auditors are insignificantly associated with the three measures of audit quality. Furthermore, we find that the differences in audit quality between the two auditor groups are mainly due to the clients' innate characteristics, rather than the competency of Big N auditors. Our results hold after performing different sensitivity analyses. Overall, our findings challenge the conventional notion that Big N auditors deliver quality-differentiated audits.
Purpose:
This article examines the state of research on environmental, social and governance (ESG) performance in the context of multinational business research. This article discusses research progress as well as various issues and complexities associated with using ESG ratings in cross-country studies and for assessing the performance of multinational enterprises (MNE) and emerging market multinationals (EMNEs).
Approach:
The article identifies emerging literature that focuses on tracking the development and uptake of ESG ratings in the international context. It discusses three emerging research streams: Research examining the ESG-financial performance relationship in emerging markets, research tracking the ESG performance of multinationals in the various countries and regions they are operating, and frameworks for assessing ESG-related risks on a country level.
Findings:
While the emerging body of work adds an important dimension to the identification and awareness of ESG issues globally, numerous unresolved issues become evident. ESG frameworks have been built to assess corporate sustainability as it relates to firms in their ‘home’ countries (typically with a focus on developed countries), with limited applicability and transferability to emerging markets. International firm activities are often not captured in detail and not comprehensively mapped across firm subsidiaries and a firm’s corporate supply chain where ESG issues are prone to happen, and ESG scores do not comprehensively integrate views and voices from various local stakeholders that are impacted by firm activities, particularly Indigenous communities.
Research implications:
Research on ESG ratings in the context of multinational business research is generally sparse and fragmented, thus creating opportunities for future research to expand on existing and emerging findings.
Practical implications:
The article creates awareness of issues to consider when using ESG ratings in cross-country studies and for assessing the ESG performance of MNEs and EMNEs: ESG scores can be subject to bias and are not weighted by materiality, which can be misleading for portfolio construction and performance measurement purposes. Managers need to be aware that ESG scores are often not capturing ESG issues occurring in supply chains and ESG issues affecting local communities.
Originality/value:
This study enriches the understanding of ESG in the context of multinational business research practice.
The current research presents fresh insights on empirically presenting the relationship between ownership structure and corporate sustainable performance of two emerging markets: Malaysia and Pakistan. Moreover, the moderating role of gender diversity is observed on the relationship between ownership structure and corporate sustainable performance. Dynamic estimator, named system generalized method of moments, is used for estimations that control for potential dynamic endogeneity, simultaneity, and reverse causality. Findings reveal that ownership concentration and state ownership are negatively related to economic, social, and environmental indicators of CSP both in Malaysia and Pakistan, whereas directors’ ownership is positively associated with all sustainability indicators. Financial institution’s ownership showed a positive significant impact on CSP in Malaysia, whereas an insignificant relationship is observed in Pakistan. Meanwhile, the moderating impact of women directors on the relationship between ownership structure and corporate sustainable performance reveals a significant impact in Malaysia and an insignificant impact in Pakistan. Generally, the findings of the study have practical implications for regulatory authorities, securities commissions, and policymakers of Malaysia and Pakistan. Moreover, there is a need to bring reforms into corporate governance structures in Pakistan, where weak economic conditions leave a frail impact of ownership structure on CSP and an insignificant moderating impact of board gender diversity.
Given the mixed evidence that having both women and men in the top management team (TMT) or in the board of directors (BOD) has a significant influence on organizational innovation, we resolve this issue by conceptualizing TMT–BOD gender diversity as part of a multiteam system, that has joint effects which impact organizational innovation. Evidence from the study of both Chinese firms and UK firms confirm our conceptualization by showing an interaction effect between TMT gender diversity and BOD gender diversity such that innovation is greatest when both are high. The positive TMT–BOD gender diversity interaction effect on innovation improves subsequent firm performance particularly in dynamic environments. The findings refine current thinking by going beyond research that tests intra‐team TMT or BOD diversity independently and instead considers inter‐team diversity across both leadership teams within the strategic leadership upper echelons. In sum, findings show that high levels of TMT and BOD gender diversity result in more organizational innovation, which ultimately improves firm performance. We offer implications for women's inclusion in leadership as well as for research on the upper echelons.
Empirical evidence indicates that Environmental, Social, and Governance (ESG) practices are associated with firm financial performance, but little is known about stock market participants’ behaviour towards ESG practices, especially in unfavourable settings, where the level of shareholders’ protection is relatively weak. In this article, we examine whether ESG performance provides shareholders with value-relevant information to help them in their equity pricing decisions. Using a cross-country sample of non-financial firms drawn from 10 Middle East and North African (MENA) countries between the period from 2013 to 2019, we find evidence, which is based on the price specification of Ohlson (1995) valuation model, that ESG performance practices are positively priced by market participants and add incremental information content to earnings and book value of equity (BVE). However, when we split the aggregate ESG performance into its components, governance practice is found to be more value relevant than social practice, while the environmental pillar is found to be value (ir)relevant to shareholders. Results using the return valuation model complement and validate the price model specification. Our results suggest that social capital and institutional structures prevail on firm environmental impact. These results are robust to a set of additional tests. Overall, our empirical results indicate that market participants incorporate ESG performance when assessing firm value for the MENA region. Our findings could have several implications for managers, stockholders and regulatory bodies.
This paper investigates how female involvement in management shapes the nature of the firm’s financial decisions in terms of debt maturity. It is suggested that female managers, being less overconfident and more conservative than men, will opt for more short-term debt to preserve financial viability in the capital structure. Using panel data for listed and unlisted European companies, we show that the presence of female executives increases the level of short-term debt financing. Moreover, we examine the financial impact of gender heterogeneity moderated by cultural differences among countries related to masculine/feminine traits in society. Female executives seem to prefer a higher level of short-term debt, especially in countries with high masculinity scores, where competitiveness and material rewards for success are very relevant. These results show that companies run by women, particularly in a “masculine” environment, tend to prefer a more flexible capital structure, reinforcing the hypothesis that female executives are less overconfident.
At our university, women are a minority in all computing and engineering majors. This situation is mirrored at other universities nationwide, as well as in technical industries. Stereotype threat, the risk of confirming a negative stereotype about one's social group, can result in women not performing as well as their male counterparts in computing, mathematics, and engineering courses. The aftermath of these experiences cause women to fear they do not belong or are not "smart enough", resulting in women switching to a different major. Even high-performing women can be subject to these pressures. We present a Scholar model for increasing gender diversity in technology fields and an evaluation of its impact on the retention and success of women in computing and engineering majors. We compare the performance of Scholars to that of non-Scholars with similar demographic and academic backgrounds who entered into the College of Engineering and Information Technology at the University of Maryland, Baltimore County.
The aim of this paper is to investigate the relationship between environmental, social, and governance (ESG) controversies and firm market value. We use a unique dataset of more than 4000 firms from 58 countries during 2002–2011. Primary analysis surprisingly shows that ESG controversies are associated with greater firm value. However, when interacted with the corporate social performance (CSP) score, ESG controversies are found to have no direct effect on firm value while the interaction appears to be highly and significantly positive. Building on this evidence, we attempt to explore the channels through which CSP may enhance market value. Conducting sample split analysis indicates that higher CSP score has an impact on market value only for high-attention firms, those firms which are larger, perform better, located in countries with greater press freedom, more searched on the Internet, more followed by analysts, and have an improved corporate social reputation. Thus, our findings provide new insights on the role of firm visibility through which firms can profit from their CSP.
This paper aims to critically review the existing literature on the relationship between corporate governance, in particular board diversity, and both corporate social responsibility (CSR) and corporate social responsibility reporting (CSRR) and to suggest some important avenues for future research in this field. Assuming that both CSR and CSRR are outcomes of boards’ decisions, this paper proposes that examining boards’ decision making processes with regard to CSR would provide more insight into the link between board diversity and CSR. Particularly, the paper stresses the importance of studies linking gender diversity and CSR decision making processes, which is quite rare in the existing literature. It also highlights the importance of more qualitative methods and longitudinal studies for the development of understanding of the diversity-CSR relationship.
Purpose
The study aims to use bibliometric and scientometric analysis to conduct a detailed investigation on the impact of disruptive technologies in accounting and reporting literature. To draw both academics and practitioners through accelerated research activities, the study also aims to look into the significance of these disruptive technologies, their potential and the opportunities they present for the accounting profession.
Design/methodology/approach
With the use of the Scopus database and a combination of accounting, reporting, auditing and technology-related keywords, 1660 research articles published between 2008 and 2023 were included in the sample. To provide graphical analysis of bibliometric data and visualize research findings such as bibliographic coupling, co-citation and keyword co-occurrence, this study used the R-biblioshiny and VOSViewer tools.
Findings
The findings demonstrate a growth in scholarly interest in the study’s area, particularly in recent years. The bibliometric analysis focuses on three key uses and applications of technology in the accounting and auditing professions: the adoption of continuous auditing and monitoring in the audit profession, the use of software tools in the audit and accounting professions and the connections between information systems and audit.
Originality/value
This study contributes to the literature by examining current research trends on the use of technology in the accounting and reporting professions, identifying gaps in the literature and, most importantly, proposing a research agenda for the field. This study’s data came entirely from English-language articles and reviews in the Scopus database. It also considers studies that are directly relevant to the use of technology in accounting and reporting.
Purpose – This paper aims to explore whether environmental, social, and governance (ESG) performance is positively associated with firm investment efficiency (IE) in emerging economies. It also examines whether board cultural diversity can moderate the ESG–IE relationship.
Design/methodology/approach – This paper uses a cross-country sample of listed firms located in seven emerging countries over the 2011–2019 period. The authors use a fixed effect panel regression to empirically test the hypotheses. The authors also use a lagged model and a Heckman’s (1979) two-stage procedure to mitigate potential endogeneity issues. In addition, a two-stage least squares regression analysis was done as an additional robustness check.
Findings – This study finds that firms with stronger ESG performance have a higher investment efficiency. Interestingly, this study finds that board cultural diversity negatively moderates the impact of ESG performance on IE for firms operating in settings prone to overinvestment. This result suggests that ESG performance plays a less important role in mitigating managers’ tendencies to overinvest when corporate boards have more foreign directors. However, the authors do not find such evidence in firms prone to underinvestment. These findings hold after using an alternative measure of IE and controlling for endogeneity concerns.
Originality/value – This paper adds to the existing body of knowledge in three dimensions. First, to the best of the authors’ knowledge, this is the first cross-country study that investigates the linkage between ESG performance and corporate IE in the context of emerging countries. Second, the authors have enriched the prior literature by examining the moderating effect of board cultural diversity on the positive association between ESG performance and corporate IE. Finally, this study has important implications for policymakers and capital suppliers in emerging countries, which strive to facilitate the efficient allocation of scarce resources.
We investigate whether an environmental social governance (ESG) disclosure moderates the relation between ESG controversies and analyst forecast accuracy. The previous literature has shown that ESG controversies increase uncertainty about a firm's future prospects, while ESG disclosure decreases this uncertainty. We therefore take the next step and integrate ESG controversies, ESG disclosure and uncertainty into one model. Our study is based on 8369 firm-year observations across 51 countries from 2008 to 2017, containing data from RepRisk, Bloomberg and the Institutional Brokers' Estimate System. We find that analyst forecast errors are generally higher for firms with higher exposure to ESG controversies. More importantly, we establish ESG disclosure as a moderator that mitigates the strength of the relation between ESG controversies and analyst forecast errors. Additionally, we identify that the most important pillar for the relation derives from social controversies and disclosure.
Purpose
This paper aims to investigate the effect of environmental, social and governance (ESG) controversies on the cost of equity (COE) capital, exploring the moderating role of both positive ESG performance and market securities regulation.
Design/methodology/approach
This paper adopts a sample of 2,599 time observations related to European listed companies for which the authors examine a set of 30 negative ESG scores across the three pillars in terms of controversies, compliance and other negative issues. This study uses the average of seven implied COE estimates.
Findings
The results show that negative ESG performance, particularly environmental controversies, increases the COE, although this impact is mitigated when associated with company efforts to improve environmental performance. Besides, environmental controversies are likely to increase the COE in countries where the market regulation is stronger, as a consequence of higher investors’ expectations towards the scrutiny role of more efficient markets against companies’ controversies.
Practical implications
Companies should take care seriously of environmental issues such as biodiversity, product impact and resource impact, because investors do react accordingly. As despite no direct effects of positive ESG performance are observed in terms of COE reduction, the mitigating role on the ESG controversies–COE relationship makes ESG practices still significant for European investors.
Social implications
The effects of ESG performance on company financial performance should be investigated under the assumption that bad events weight more than positive ESG performance.
Originality/value
Because no prior studies have specifically assessed the effect of the European listed companies’ ESG controversies on their COE, this paper delivers insights into the relationship between positive and negative ESG performance and their effects on capital market financing.
This study investigates how environmental, social, and governance controversies affect bank risk taking. By estimating a dynamic panel data model from 2011 to 2020, we find evidence that banks with fewer ESG controversies take less risk. Banks with a lower number of ESG controversies show their compliance with the implementation of ESG strategies to reduce risk, as evidenced by lower risk‐weighted assets and higher Z‐scores. The present study supports the recent guidelines on climate‐related and environmental risks published by the Basel Committee on Banking Supervision and the European Central Bank. Therefore, the main results strengthen the need for the integration not only of social and governance risks but also of climate‐related and environmental risks in banks' risk management framework.
Purpose
The purpose of this study is to investigate the link between top management team (TMT) gender diversity and firm risk-taking in hospitality companies. The study also links female leadership to risk-taking. Finally, this study examines the moderating effects of TMT incentive pay and TMT age on the relationship between TMT gender diversity and firm risk-taking.
Design/methodology/approach
This study uses an unbalanced data set of 81 hospitality firms and 888 firm-year observations over the period of 1992–2020. The study uses fixed-effects regression estimation for primary analyses and addresses potential endogeneity concerns via two-stage least square regression with firm fixed-effects instrumental variable regression. Risk-taking is measured by total firm risk (i.e. the annualized volatility of daily stock returns). Main results are supported with alternative measures of firm risk and estimation methods.
Findings
The study finds that increasing TMT gender diversity leads to a reduction in firm risk-taking in the hospitality industry. Moreover, the study finds that hospitality firms led by a female CEO experience lower firm risk compared to firms led by a male CEO. Finally, the study finds evidence that the relationship between TMT gender diversity and firm risk is contingent on the level of incentive pay awarded to TMT members and the age of TMT members. Increasing incentive pay and aging executive teams decrease the risk reduction effect of TMT gender diversity.
Practical implications
The findings of this study recommend that firm risk-taking in the hospitality industry is related to gender diversity in TMTs. Hence, the board of directors should pay attention to gender composition for executive positions for risk management. Moreover, the results also suggest that care should be exercised when using incentive pay to align the interests of managers and shareholders. Finally, the board of directors needs to consider both gender diversity and age of the TMT members for TMT composition to manage executives’ risk-taking behavior.
Originality/value
This study fills a research gap in the hospitality literature by providing empirical evidence for the link between TMT gender diversity and firm risk-taking. Additionally, the study introduces incentive pay and age of TMT as contingency factors for the link between TMT gender diversity and firm risk-taking.
Drawing on upper echelon theory, we examine how top management team (TMT) gender diversity impacts the adoption of environmental standards in emerging countries. We further examine how this impact is affected by women executives’ personal attributes as well as organizational and institutional conditions. Using panel data from 490 firms in three highly polluted emerging countries (China, India and Pakistan) and employing Probit instrumental variable regressions, we find that the proportion of women in TMTs is positively related to the likelihood of ISO 14001 certification and renewal. Additionally, we find that high institutional gender parity, women executives’ power and CSR committees strengthen this relationship. Our findings, which demonstrate a systematic translation of women’s values into environmental strategy, make important contributions to literature and practice.
This study investigates the role of gender diversity in fraud commission and detection with a view to identifying whether companies with more female corporate leaders are less likely to be involved in financial statement fraud. Using a bivariate probit model, the role of female corporate leaders in financial statement fraud commission and detection is examined for Chinese listed companies from 2007 to 2018. The representation of female corporate leaders increases the likelihood of fraud detection, thus reducing firms’ propensity to engage in fraud. The finding confirms that women are risk averse and more committed to ethical practices than men in corporate leadership positions. Moreover, this impact of gender diversity is contingent upon the nature of ultimate controllers of listed companies: more female representation in top leadership roles can mitigate fraud commission or detect fraud effectively in non-state-owned enterprises, but not in state-owned enterprises. In addition, the recent anti-corruption campaign initiated by Chinese President Jinping Xi is a powerful form of public governance. Female corporate leaders play a more positive role in mitigating fraud commission and detecting fraud commission in the post-campaign period than in the pre-campaign period.
This study examines the consequence of environmental, social, and governance (ESG) performance on oil and gas firms' financial risk. This study uses an international sample of 70 oil and gas firms from 2010 to 2018 and applies two-stage least squares panel regression analysis to defaecate the endogeneity issue. This study finds an adverse effect of ESG performance on total risk. Board gender diversity adversely influences the total and systematic risk. Also, board gender diversity and ESG controversy have a substantial moderating effect on ESG and financial risk connection. The findings are consistent with the stakeholder, risk management and legitimacy theory. The firms that perform reasonably on ESG have lower total risk. However, the firm's negligence on ESG and involvement in ESG controversies moderates ESG-total risk nexus. Similarly, women's weak participation on board considerably moderates and escalates the association between ESG and financial risk. The findings will help investors and portfolio managers evaluate how ESG, ESG controversy, and board gender diversity influence firms' financial risk and help them make better investment decisions. Additionally, regulators can revise the ESG and ESG controversy disclosure criteria and make them accessible to all stakeholders for better decision making.
This study provides quantitative evidence on the positive effect of spending on socially responsible causes on the long-term growth of U.S technology companies. Maximizing shareholder wealth remains the overarching principle driving organizational strategies, but this has always conflicted with other stakeholders' interests. Because of these conflicting priorities, entrenching the principles of social responsibility has become imperative. We leverage content analysis, multiple regressions, fixed-effects and, pooled regression models to examine the effect of engaging in CSR on tech companies' corporate financial performance in the U.S. The empirical study consists of panel data of the top 100 tech companies listed on the S&P 500 for the period 2017 and 2019. Using multiple regressions, we examine the link between corporate financial performance and CSR proxies. The main results indicate that tech companies that spend more on CSR experience a corresponding increase in revenue and profitability. Contrary to previous studies, we observe insignificant evidence to support a relationship between CSR and Tobin's Q.
This study examines how female board directors and top managers may influence an organization’s decision to adopt ISO 14001. Upper Echelon Theory (UET) argues that an organization’s outcomes are based on the decisions made by its directors and managers, who however are influenced by their background characteristics. Therefore, it is crucial to assess how gender diverse boards and top management teams affect the likelihood of sustainability initiatives such as the ISO 14001 certificate being adopted. According to data gathered from Kenyan companies, having women on boards increases the probability of ISO 14001 adoption. On the contrary, there was weak correlation with having women in the top management team. Establishing gender diversity also supports adopting global sustainability initiatives, such as ISO 14001, as a strategy to enhance environmental performance of a firm. This study advances the CSR literature on establishing gender diversity in the workplace as a way to improve corporate performance.
The topic of corporate social responsibility (CSR), along with the related environmental, social and governance (ESG) pillars, is playing a key role in the literature and is attracting increasing interest among managers and policymakers. Nevertheless, we still know little about how and whether corporate controversies, which are strictly related to CSR, impact firm performance. As a result, this study aims to explore the impact of corporate controversies on financial performance, and proposes the positive moderating role of ESG practices over the aforementioned relationship. Using a database of 356 European listed companies, linear regression models confirm a negative and significant relationship between corporate controversies and financial performance. However it was not possible to confirm the positive moderating effect of ESG practices on the relationship between controversies and financial performance. The study contributes to the literature on CSR and stakeholder theory, shedding light on the negative consequences of controversies and indicating that, despite no mitigating effects of ESG practices on the controversies/performance relationship have been found, ESG practices are important for addressing stakeholders’ needs. Regarding managerial implications, this study underlines that controversies are detrimental for firm performance, and that ESG practices should not serve as means for mitigating the negative effects of controversies, but rather as ways for avoiding controversies.
We examine the effect of board structure on Environmental, Social and Governance (ESG) disclosure in Latin America. Previous studies have presented diverse results, but Latin American companies are rarely studied. We argue that the institutional context of Latin America should change some of the relationships between board structure and ESG disclosure ordinarily observed in the literature. We tested our hypotheses about the influence of board size, women on the board, CEO duality, and independent directors, on ESG disclosure using a four-year panel collected from the Bloomberg and Capital IQ databases. We found that board size and independent directors impact ESG disclosure positively, but women on the board and CEO duality impact ESG disclosure negatively. These findings provide new insights into ESG disclosure in Latin America.
Drawing on upper echelons and resource dependence theories and using data of European listed companies over the period 2009–2016, we examine the effects of corporate social responsibility (CSR) strategy and board gender diversity on environmental and social performance. In particular, we investigate whether CSR strategy contributes to improving corporate environmental and social performance, and whether this relationship is moderated by board gender diversity. Our empirical findings suggest that firms with more effective CSR strategies exhibit better environmental and social performance. The results also show that board gender diversity is positively associated with environmental and social performance, thus supporting the notion that board gender diversity promotes sustainable development. Furthermore, the findings reveal that the positive relationship between CSR strategy and environmental performance is negatively moderated by board gender diversity. Finally, the results show that that national governance quality and firm size are important underlying factors affecting corporate environmental and social performance.
Using legitimacy and institutional theories, this study investigates whether lending institutions reward firms in 15 EU countries for their environmental, social and governance (ESG) performance and disclosure in terms of lowering their cost of debt capital. Our study distinguishes between ESG performance that is used to indicate an effective commitment to ESG strategies, and ESG disclosure that represents an effort to construct an image of commitment designed to positively influence stakeholders’ perceptions. Supporting a version of legitimacy theory, we find that lending institutions value both ESG performance and disclosure and integrate ESG information in their credit decisions – in that firms with stronger ESG performance have a lower cost of debt, and ESG disclosure has an equal impact on the cost of debt as ESG performance. Although these findings suggest that the market (in context) can engender more desirable social outcomes by rewarding ESG practices, it fails to distinguish between ESG performance and disclosure (which may be contrasted as the more substantive and the more symbolic). Moreover, our results also reflect upon the importance of the role that civil society and the state play in addressing and exploring the limitations of free-market regimes. Specifically, we provide evidence that the impact of ESG performance and disclosure on the cost of debt is more dominant in the stakeholder-oriented countries (where the community is more prevalent). Our main findings are robust to a battery of sensitivity tests, including an alternative measure of the cost of debt, model specifications, and different approaches to address endogeneity. We acknowledge limitations in our research method but point nevertheless to its value in supporting a critical perspective and make suggestions for future research.
The relationship between a company's sustainability practices and its financial performance has been investigated with different methods and from different theoretical perspectives. This study aims to answer the following questions: (a) Do investors react to the publication of sustainability reports on company websites? (b) Has the market reaction to the publication of the sustainability report increased in the last few years? In this study, 170 report disclosures were considered from 55 listed companies from all over the world in the period from 2009 to 2016. To analyze the impact of the report publications on the security returns, 33 different event windows were analyzed. Results show two significant event windows and an increasing level of significance in the reports released after 2013.
This study explores whether firms strategically utilize symbolic and substantive CSR as means to repair reputational damage following a corporate controversy. Further, we shed light on market reaction towards firms’ engagement in symbolic and substantive CSR and how such reaction varies across countries when differing levels of trust are evident. Using a sample of 9117 firm-year observations in an international setting, we find that firms are more likely to engage in symbolic CSR than substantive CSR and the relationship between the level of controversy and the firm's engagement in symbolic CSR is an inverted U. In addition, our two-way interaction analysis illustrates that the market positively views the symbolic CSR engagement following a corporate controversy, and this positive effect is only pronounced in countries with higher levels of mutual trust.
This study examines the relationship between board gender diversity and corporate environmental violations. Drawing on gender socialization and diversity theories, greater female board representation and female chief executive officers (CEO) are expected to reduce the frequency of corporate environmental violations. Empirical evidence in this study shows that firms with greater board gender diversity are less often sued for environmental infringements. In contrast, CEO gender is linked to reduced environmental litigation only in firms with low female board representation. I explore the relationship between board gender diversity and improved corporate environmental policies as a mechanism to explain the reduced litigation frequency. The findings are robust to controlling for reverse causality, propensity score matching, subsample analyses, different variable definitions, alternative model specifications, and industry controls and adjustments. These findings provide important insights to investors, managers, and policymakers into the role of female leadership in public companies.
We investigate the role of female executives in curbing earnings management behaviour in Korea, a country known for its strong male-dominant culture. In a sample of Korean firms from 2002 to 2010, we find that female presence in top management is negatively associated with discretionary accruals, suggesting that gender diversity in senior management deters opportunistic financial reporting even in a highly male-dominant corporate environment. Further, this association is primarily observed in firms with stronger (weaker) female (male) dominance. This finding is consistent with the idea that female executives can exert more influence on corporate decisions in a more female-friendly environment. These findings have implications for academics and practitioners seeking to understand the impact of the role of top executive gender diversity in corporate accounting practices.
Addressing environmental, social and governance (ESG) issues has become a critical part of business strategy. This article explores the extent of ESG reporting of metal and mining sector companies listed in the Australian Securities Exchange to determine the nature of ESG indicators in use in the sector. The current study argues that stakeholder engagement is the key to enhance company environmental policy and sustainable development. According to the results of this study, ESG reporting motives are highly influenced by reporting regulations. Given the diversity in reporting of ESG, comparability of ESG strategic performance is problematic. This study contributes towards developing an ESG disclosure index, which companies could use as a legitimacy tool that external stakeholders could use to reliably measure and compare the ESG performance of companies. It also reveals there is an increased demand for more empirical research on integration of sustainability into strategic planning process. Copyright © 2016 John Wiley & Sons, Ltd and ERP Environment
This paper studies the effectiveness of a firm's strategy to report on its ESG activities with regard to the extent and direction in which the firm's ESG performance is valued by capital market investors. It is the first to disentangle the moderating effects of different types of ESG reporting on market valuation of ESG performance and to analyze whether following the current integrated reporting trend is worth the effort. Results indicate that ESG performance is valued more strongly and in the (desired) positive direction when firms publish an ESG report, irrespective of its type (stand-alone or integrated). Furthermore, integrated reporting is associated with superior outcomes compared with a stand-alone report for composite ESG and corporate governance performance. Our findings are important for corporate managers, as they help to understand market valuation of ESG performance in dependence on the reporting type and provide guidance for formulating and evaluating the reporting strategy. Copyright © 2016 John Wiley & Sons, Ltd and ERP Environment
Women have made great strides in recent years in climbing the corporate ladder, yet the current corporate land: scape suggests that obstacles still exist before true gender equity is achieved. We investigate the impact of gender diversity in top management teams (TMTs) on firm performance and firm risk, in conjunction with examining the moderating effect of gender diversity on executive compensation. We find that firms with greater gender diversity in TMTs show lower risk and deliver better performance. In turn, female executives were found to be paid less than their male colleagues, even at the TMT level. However, as gender diversity in the TMT increases, compensation differences between the genders decrease. As such, we highlight a failure in the employment market place and also point to continuing challenges faced by female executives in their search for parity in TMTs.
This study investigates firms subject to accounting enforcement actions by the Securities and Exchange Commission for alleged violations of Generally Accepted Accounting Principles. We investigate: (i) the extent to which the alleged earnings manipulations can be explained by extant earnings management hypotheses; (ii) the relation between earnings manipulations and weaknesses in firms' internal governance structures; and (iii) the capital market consequences experienced by firms when the alleged earnings manipulations are made public. We find, that an important motivation for earnings manipulation is the desire to attract external financing at low cost. We show that this motivation remains significant after controlling for contracting motives proposed in the academic literature. We also find that firms manipulating earnings are: (i) more likely to have boards of directors dominated by management; (ii) more likely to have a Chief Executive Officer who simultaneously serves as Chairman of the Board; (iii) more likely to have a Chief Executive Officer who is also the firm's founder; (iv) less likely to have an audit committee; and (v) less likely to have an outside blockholder. Finally, we document that firms manipulating earnings experience significant increases in their costs of capital when the manipulations are made public.
In this paper, we empirically investigate how CEO gender affects corporate cash holdings and the over-investment of free cash flow among Chinese listed firms. Thereby, we utilize a sample of 468 listed firms with female CEOs and a matched sample of firms with male CEOs during 2007-2011. We then make a distinction between listed SOEs and non-SOEs in China. The empirical results show that female CEOs are associated with a higher level of corporate cash holdings, especially in Chinese listed non-SOEs. Compared with their male counterparts, female CEOs are more concerned with the precautionary motive of cash, while they care less about the opportunity cost of cash. Besides, we find that female CEOs moderate the over-investment problem of free cash flow, again indicating that they are more conservative than their male counterparts. The latter finding is more pronounced in the subsample of Chinese listed SOEs.
