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Illuminating Risk or Building Credibility: The Role of Sustainability Committees in Reshaping the ESG–Cash Flow Relationship in China

Author

Listed:
  • Norman Mohd Saleh

    (Faculty of Economics and Management, Universiti Kebangsaan Malaysia, Malaysia Author-2-Name: Xu Haonan Author-2-Workplace-Name: Faculty of Economics and Management, Universiti Kebangsaan Malaysia, Malaysia Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)

Abstract

" Objective - To examine whether sustainability committees (SCs) influence the relationship between environmental, social, and governance (ESG) disclosure and cash flow volatility (CFV), with particular attention to the role of SCs in ESG risk governance. Methodology/Technique - The study uses data from A-share firms listed on the Shanghai and Shenzhen Stock Exchanges from 2013 to 2022. Further analyses examine differences across manufacturing firms, highly developed regions, and varying levels of media attention. Findings - Higher ESG disclosure is associated with lower CFV, suggesting that transparent ESG disclosure can enhance financial stability through increased stakeholder trust. However, the presence of an SC weakens this stabilizing effect because SCs may identify and disclose material ESG risks, attracting short-term market attention and increasing volatility. The effect is stronger among manufacturing firms and firms in highly developed regions but weakens when media attention is low. Novelty - The study provides new evidence that sustainability committees create value not merely by enhancing the credibility of ESG disclosures but by actively identifying and overseeing ESG risks. It challenges the conventional view that governance mechanisms primarily reduce volatility through improved disclosure credibility and highlights effective ESG risk governance as a more important function of SCs. Type of Paper - Empirical"

Suggested Citation

  • Norman Mohd Saleh, 2026. "Illuminating Risk or Building Credibility: The Role of Sustainability Committees in Reshaping the ESG–Cash Flow Relationship in China," GATR Journals afr252, Global Academy of Training and Research (GATR) Enterprise.
    • Handle: RePEc:gtr:gatrjs:afr252
    DOI: https://doi.org/10.35609/afr.2026.11.2(1)
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    Keywords

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    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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