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The opaque scorecard: Environmental, social and financial information during a crisis

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Abstract

We show that firms with higher environmental and social (ES) engagement exhibited lower financial reporting quality (FRQ) during the COVID-19 crisis—a pattern not observed in the pre-crisis period. We argue that this decline can be driven by increased complexity and reduced monitoring effectiveness under crisisinduced uncertainty. The result is robust across different ES measures, including ES scores and (social) media sentiment, and holds under both standard and synthetic difference-in-differences approaches. The effect is more pronounced in contexts with greater government intervention via income support and debt relief, policies that may have added to reporting complexity. At the firm level, the decline in FRQ is stronger among firms with weaker governance or management practices—specifically when the CEO pay is not linked to shareholder returns or that of senior executives to sustainability objectives, and with lower strategic or institutional ownership. We identify potential channels for the decline in FRQ, such as increased variation in depreciation and amortization expenses, intangible assets, R&D spending, inventories, and labor costs during the crisis.

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  • Mircea Epure & Serhat Hasancebi, 2025. "The opaque scorecard: Environmental, social and financial information during a crisis," Economics Working Papers 1932, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:1932
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    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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