ESG Reporting and Analysts’ Recommendations in GCC: The Moderation Role of Royal Family Directors

Alazzani, Abdulsamad; Wan‐Hussin, Wan Nordin; Jones, Michael; Al‐Hadi, Ahmed

doi:10.3390/jrfm14020072

Cited by 31 publications

(52 citation statements)

References 53 publications

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“…A qualitative study is needed to understand the motivations of tax avoidance in Omani financial institutions and to gain deeper insights into the experiences of AC chair and directors in their advisory or monitoring roles. In addition, Oman is one of the GCC countries that is characterized by royal families that might be involved in different business activities (Alazzani et al 2021). It would be interesting to explore the moderating role of the royal family directors on overlapped AC chair/director-tax avoidance relationships.…”

Section: Discussionmentioning

confidence: 99%

Do Overlapped Audit Committee Directors Affect Tax Avoidance?

Lawati

Hussainey

2021

JRFM

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This research is motivated by the Omani government’s desire to reduce tax avoidance and bolster tax revenue collected from financial institutions. The purpose of this paper is to examine the impact of overlapped audit committee (AC) chairs and other directors on tax avoidance practice and whether they play a monitoring or advisory role in tax avoidance practice. As a measure of overlapped AC chairs, we used a dummy variable to indicate whether an AC chair sits on other committees within a company or not. We used the proportion of AC members who serve on the AC and other committees within a company as our proxy for overlapped AC directors. We used a company’s cash effective tax rate as a proxy for tax avoidance. We regressed tax avoidance on overlapped AC membership and other control variables, using a sample of 204 firm-year observations from financial institutions listed on the Muscat Stock Exchange between 2014 and 2019. Our regression results show that a higher proportion of overlapped AC members and the presence of an overlapped AC chair were both associated with lower effective tax rates, which equated to more tax avoidance. This suggests that these directors play an advisory role in the Omani context. We found, however, that these directors play a monitoring role when firms take a loss. From these findings, we draw important implications for regulators who need to rethink the potential consequences of having overlapped AC chairs and AC directors. Our study focuses on Omani financial institutions, which are highly regulated and monitored by the central bank, and our findings may not be directly applicable to non-financial institutions that are less regulated, so caution is needed when interpreting the findings. Further research could employ a repeated measured research design, such as ours, and explore the same research question in non-financial institutions.

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Section: Discussionmentioning

confidence: 99%

Do Overlapped Audit Committee Directors Affect Tax Avoidance?

Lawati

Hussainey

2021

JRFM

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“…Muslu et al (2019) developed a disclosure score based on textual analysis of CSR report narratives and found that CSR reporters with high disclosure scores are associated with more accurate forecasts. Using the Gulf Cooperation Council countries, Alazzani et al (2021) documented a positive relationship between analysts' recommendations and ESG disclosure and found that analysts assess ESG disclosure in firms with political connections as a strategic compliance. Berkan et al (2021) investigate the relationship between corporate social irresponsibility and financial analysts' performance and document that analysts tend to underestimate the effects of bad behaviour.…”

Section: Literature Reviewmentioning

confidence: 99%

“…ESG covers the three main areas: environment, social and governance. ESG ratings assess areas ranging from sustainability to corporate governance (Alazzani et al, 2021). From the perspective of information asymmetry, ESG ratings not only provide extra nonfinancial information but also complement the existing financial information, which provides incrementally useful information to investors and financial analysts.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

“…However, they regard ESG disclosures as superficial compliance rather than genuine commitment. In contrast with Alazzani et al (2021), this paper focuses more on the channels through which ESG ratings affect the accuracy of analysts' earnings forecasts. ESG ratings are a useful input into the analysts' earnings forecasting process for the following reasons.…”

mentioning

confidence: 99%

“…To empirically test our hypotheses, following the extant literature (Alazzani et al, 2021), we exploit Bloomberg ESG ratings, which are based on the Global Reporting Initiative, and analyse a large sample of Chinese listed firms from 2011 to 2020. Our findings show that ESG ratings increase analysts' forecast accuracy.…”

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confidence: 99%

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Corporate sustainability and analysts' earnings forecast accuracy: Evidence from environmental, social and governance ratings

Luo¹,

2022

Corp Soc Responsibility Env

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We investigate the effect of corporate sustainability on analysts' forecast accuracy. Specifically, this paper documents how financial analysts respond to environmental, social and governance factors (hereinafter ESG) in earnings forecasts. Using a novel dataset from the Bloomberg ESG ratings, we find that ESG ratings increase analysts' forecast accuracy by reducing information risks and operation risks. The results are robust to a series of robustness checks, including propensity score matching, Heckman two‐stage estimation, staggered difference‐in‐differences (DID), placebo test, firm and year fixed effects and alternative proxies. The effect of ESG ratings on analysts' forecast accuracy is more pronounced for firms audited by accounting firms with low industry expertise and for firms tracked by analysts with low industry expertise. This paper responds to the calls for more research on ESG ratings and analysts' earnings forecast accuracy and provides implications that ESG assurance can effectively improve the quality of nonfinancial information of a company. In addition, the paper is valuable for policymakers to improve the ESG disclosure system.

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Navigating the impact: A comprehensive analysis of ESG disclosure consequences through systematic review

Li,

Saat,

Khatib

et al. 2024

Bus Strat Dev

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The purpose of this article is to provide a comprehensive and systematic assessment of the literature on the consequences of environmental, social, and governance (ESG) disclosure by means of content analyses. Using a systematic approach, a sample of 165 studies was collected from the Web of Science database and evaluated on the basis of econometric and content analyses, including publication trends, geographical distribution, theories and consequence associated with ESG disclosure (investment and innovation of firms, financing cost and method, operations and financial risk of firms, firm performance and value and others), provides some direction for future investigation. According to the analysis, the literature was more interested in the stakeholder theory when examining the effects of ESG disclosure on areas including company innovation and investment, financing costs and methods, financial risk and operations, business performance, and others. Even though most of the literature has focused on firm performance and value, there is still no clear understanding of the relationship. Also, limited work was found on the investment and innovation of firms, and financing cost and method, while the impact of operations and financial risk of firms has yet to be explored. Meanwhile, this study also identified the impact of ESG disclosure on analysts, audit fees, and earnings management as a new research direction. Finally, this study innovates new findings that institutional pressures may have an impact on the consequences of ESG disclosure, a topic not found in previous studies.

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ESG Reporting and Analysts’ Recommendations in GCC: The Moderation Role of Royal Family Directors

Cited by 31 publications

References 53 publications

Do Overlapped Audit Committee Directors Affect Tax Avoidance?

Do Overlapped Audit Committee Directors Affect Tax Avoidance?

Corporate sustainability and analysts' earnings forecast accuracy: Evidence from environmental, social and governance ratings

Navigating the impact: A comprehensive analysis of ESG disclosure consequences through systematic review

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