Do Equity Investors Care about Environment, Social and Governance (ESG) Disclosure Performance? Evidence from India

Abstract

Sustainability reporting is an essential feature for firms looking for business opportunities. We investigated whether and how environmental, social and governance performance disclosures impact the cost of equity capital, individually and in aggregate. Data for 89 Indian firms listed on exchange during 2017–2020 is considered for the study. Fixed-effect panel regression is applied to data for examining the relationship between ESG and the cost of equity capital. Results of the study show that ESG performance disclosure negatively impacts cost of equity capital, providing the firm with capital at a lower cost. ESG disclosures create long-term value for investors and reduce information asymmetry, thereby building investors’ confidence.

The Impact of Corporate Governance, Information Asymmetry and Sustainability Reporting: A Systematic Exploration

“…This reporting is important because ESG performance disclosure negatively impacts the cost of equity capital, resulting in the firm lower cost of capital. ESG disclosures create long-term value for investors, reduce information asymmetry, and build investors' confidence (Mulchandani et al, 2022). A sustainability report should include the environmental and social impacts on firms (Mulchandani et al, 2022;Oware et al, n.d.).…”

“…ESG disclosures create long-term value for investors, reduce information asymmetry, and build investors' confidence (Mulchandani et al, 2022). A sustainability report should include the environmental and social impacts on firms (Mulchandani et al, 2022;Oware et al, n.d.). It is presented as an integrated report with the contents of the financial reporting to stakeholders or a separate document (stand-alone) with the advantage of communicating better information (Oware et al, n.d.).…”

“…The ESG performance disclosures can reduce the cost of equity capital, providing the firm with capital at a lower cost. ESG disclosures create long-term value for investors, reduce information asymmetry, and build investors' confidence (Mulchandani et al, 2022). The benefit of ESG performance disclosure is that it can help to reduce gas emissions.…”

Environmental, social and governance (ESG) e desempenho financeiro no setor de construção civil: um panorama da produção científica internacional

“…Estudos prévios indicam que há um crescente interesse por parte das partes envolvidas em informações não puramente financeiras relacionadas ao meio ambiente, aspectos sociais e governança, também conhecidas como ESG (Al-Hiyari & Kolsi, 2021;Mulchandani, Mulchandani & Lonare, 2022). Isso tem gerado uma série de oportunidades e desafios para as empresas em relação à gestão dos riscos e retornos financeiros.…”

“…Isso tem gerado uma série de oportunidades e desafios para as empresas em relação à gestão dos riscos e retornos financeiros. Nos países em desenvolvimento, observa-se uma demora na incorporação da sustentabilidade nas tomadas de decisão de investimento, o que se reflete nas estruturas de propriedade corporativa, nos mercados de capitais emergentes, na escassez de divulgação e na falta de atenção dos investidores (Mulchandani, Mulchandani & Lonare, 2022).…”