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Audit quality, media coverage, environmental, social, and governance disclosure and firm investment efficiency

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  • Ahmad Hammami
  • Mohammad Hendijani Zadeh

Abstract

Purpose - The purpose of this study is twofold: first, to introduce two determinants of environmental, social and governance (ESG) disclosure transparency, namely, audit quality and public media exposure; and second, to investigate the impact of ESG transparency on firm-level investment efficiency. Design/methodology/approach - Ordinary least square (OLS) regressions are applied to explore the relationship between the two variables of interest (audit quality and public media exposure) and ESG transparency on a sample of publicly listed Canadian firms during the period 2008 to 2017. Then, an econometric model is used to investigate the association between ESG transparency and investment efficiency under two identified scenarios, under-investment and over-investment. Findings - Results show that audit quality and public media exposure are two main drivers of ESG transparency, hence, commitment to high-quality audits and exposure to high public media coverage drive firms to disclose more extensive and transparent ESG information. The authors also find a negative association between ESG transparency and firm-level investment inefficiency. Thus, ESG transparency generates influential incremental information that helps mitigate the information asymmetry between firms and stakeholders while fostering better resource allocation through investment efficiency. Originality/value - This study contributes to the corporate social responsibility (CSR) and ESG literature by identifying audit quality and public media exposure as two determinants of ESG transparency; and by noting that higher ESG transparency has a significant economic effect on capital investment decisions through higher firm-level investment efficiency.

Suggested Citation

  • Ahmad Hammami & Mohammad Hendijani Zadeh, 2020. "Audit quality, media coverage, environmental, social, and governance disclosure and firm investment efficiency," International Journal of Accounting & Information Management, Emerald Group Publishing Limited, vol. 28(1), pages 45-72, January.
    • Handle: RePEc:eme:ijaimp:ijaim-03-2019-0041
    DOI: 10.1108/IJAIM-03-2019-0041
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    Citations

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    Cited by:

    1. Susi Susilawati & Titik Aryati & Vinola Herawaty, 2024. "Financial Reporting Quality, ESG and Prosperity Disclosure, and Investment Efficiency: The Role of Information Asymmetry (Moral Hazard Friction)," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 7, pages 142-160.
    2. Wen‐Min Lu & Qian Long Kweh & Irene Wei Kiong Ting & Chunya Ren, 2023. "How does stakeholder engagement through environmental, social, and governance affect eco‐efficiency and profitability efficiency? Zooming into Apple Inc.'s counterparts," Business Strategy and the Environment, Wiley Blackwell, vol. 32(1), pages 587-601, January.
    3. Umair Bin Yousaf & Muhammad Zubair Tauni & Imran Yousaf & Nancy Lixin Su, 2024. "Board competence and green innovation—Does external governance matter?," Business Strategy and the Environment, Wiley Blackwell, vol. 33(4), pages 3078-3102, May.

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