ESG Risks and the Value Relevance of Current and Historical Earnings

Cheng, Mingying; Micale, Joseph

doi:10.1111/fmii.12162

Cited by 9 publications

(3 citation statements)

References 68 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…During the last two decades, firms have increased non-financial reporting relating to environment (Bansal et al, 2022;Cheng & Micale, 2022;Krueger et al, 2020). As Baier et al (2020) find in a textual analysis of 10-K reports regarding ESG, the topic with the most stable increase in the share of words in the 10-K report was "environmental," which according to the authors underlines firms' awareness of the importance of environmental disclosure.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

See 1 more Smart Citation

Climate‐related performance and stock price crash risk

Kosmidou,

Kousenidis,

Ladas

et al. 2024

Financial Market

View full text Add to dashboard Cite

We examine how environmental performance affects future stock price crash risk. Previous literature shows that legitimacy threats, stemming from environmental risk, lead firms to be particularly sensitive about environmental disclosure and performance. However, we hypothesise and find that under specific conditions, relating to lower operating performance, firms that have higher environmental performance also have higher future stock price crash risk. Further analysis shows that such firms may also have lower readability and more confident tone in their 10‐K annual reports. We attribute these findings to impression management utilising environmental performance along with disclosure misdirection practices, where managers of firms with negative news, attempt in some cases to draw the attention of the users of financial reports by obfuscating annual reports for bad news hoarding purposes. Even though in the current year such practices may have a negative effect for stock price crash risk, future stock price crash risk increases due to the dissemination of the negative news in the market. Overall, our results show that environmental disclosure may be used, under certain conditions, as a tool for impression management, which along with financial reporting distraction practices, leads to higher future stock price crash risk.

show abstract

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

“…During the last two decades, firms have increased non‐financial reporting relating to environment (Bansal et al., 2022; Cheng & Micale, 2022; Krueger et al., 2020). As Baier et al.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Climate‐related performance and stock price crash risk

Kosmidou,

Kousenidis,

Ladas

et al. 2024

Financial Market

View full text Add to dashboard Cite

show abstract

“…Важным был также вопрос о влиянии отчётности по ESG на рыночную стоимость компаний (Micale and Cheng 2022;Vitolla, Salvi, Raimo, Petruzzella & Rubino 2020). На протяжении последних 50 лет, начиная с 1970-х гг., было проведено более 2000 исследований, из которых более 60% установили положительную корреляцию между учётом ESG-факторов и стоимостью публичных компаний (Friede, Busch & Bassen 2015).…”

Section: модель индекса Esg-транспарентности корпоративной отчётностиunclassified

A Model of ESG-Transparency Index in Corporate Reporting

Bulyga

Melnik

Safonova

et al. 2023

Vestnik MGIMO-universiteta

View full text Add to dashboard Cite

The increasing importance of Environmental, Social, and Governance (ESG) assessments in advancing the international sustainable development agenda necessitates the disclosure of ESG reporting information by public companies. Such disclosure plays a crucial role in facilitating effective global business communication with stakeholders and enhancing the credibility of ESG transparency measurements. The primary objective of this study is to develop and validate a robust model for a business transparency index. By leveraging mathematical tools, this model quantitatively measures the level of Environmental, Social, and Governance (ESG) transparency, taking into account the requirements of stakeholders and evaluating a public company's ability to disclose comprehensive information.The research hypothesis posits that assessing ESG transparency in public company reporting based solely on the "quantity" of estimated values, while neglecting the critical factors of "quality" and "reliability," undermines the accuracy and reliability of the results. By utilizing existing mathematical tools, a business value management model is constructed, incorporating a balanced system of "quantity," "quality," and "reliability" factors present in the ESG information disclosed in public company reports.The research methodology adopts a comprehensive approach, combining logical and structural analysis, mathematical modeling, and content analysis methods. A thorough examination of the regulatory framework, international and Russian practices, and scientific research in ESG disclosure reveals the emergence of authoritative professional standards and frameworks between 2000 and 2023. These standards and frameworks play a pivotal role in shaping the disclosure of financial and non-financial information related to sustainable development in corporate reporting. However, a significant gap exists in established practices for determining ESG transparency levels. Current "transparency indices" fall short in incorporating these factors, leading to methodological incomparability and gaps in assessing the "quality" and "reliability" of estimated values.To address this gap, the authors propose a novel mathematical model for the ESG transparency index in corporate reporting. This model effectively integrates the factors of "quantity," "quality," and "reliability" within the disclosed information of public companies. Through a comparative analysis of disclosure and verification practices across various types of activities within Russian public joint-stock companies (PJSCs), the established model enables the creation of an industry rating gradation. This rating gradation assists in determining the level of information disclosure about public companies' activities, fulfilling societal (state) requirements and optimizing business objectives.

show abstract

The influence of ESG score on financial performance: Evidence from the European health care industry

Candio

2024

Strategic Change

View full text Add to dashboard Cite

Company managers are increasingly recognizing that sustainable practices are not just ethical imperatives but potential drivers of long‐term value. To determine the degree to which this is grounded in business reality, a growing body of empirical studies have examined whether higher environmental, social, and governance (ESG) performance predicts better financial performance. However, conflicting findings have emerged, with reviews highlighting the role that methodological choices, normative setting, and industry can play in moderating that relationship. Unlike other industries, health care has been the focus of only a handful of heterogeneous quantitative studies. To contribute to this evidence base for the European context, the present study comprehensively examined whether and how ESG score can influence both accounting‐ and market‐based measures of financial performance. Company data from the top health care companies listed in the STOXX 600 Index over the last decade (2012–2022) were gathered and analyzed. The analysis results confirmed that a marked heterogeneity of effects across the different ESG scores and measures of financial performance exists, which is not merely due to differences in empirical strategy, with modest positive effects being estimated in most cases. Of the three pillars, the governance score consistently predicted more positive financial performance among the sample of listed European companies. The environmental pillar score only influenced accounting‐based measures, though inconsistently, whereas the social pillar did not seem to have any predicting role for accounting‐based measures. Future research should consider replicating the proposed analytical framework in other data settings and normative contexts to strengthen the current evidence base and therefore deepen our understanding of the mechanisms underlying the investigated relationships in the health care industry.

show abstract

ESG Risks and the Value Relevance of Current and Historical Earnings

Cited by 9 publications

References 68 publications

Climate‐related performance and stock price crash risk

Climate‐related performance and stock price crash risk

A Model of ESG-Transparency Index in Corporate Reporting

The influence of ESG score on financial performance: Evidence from the European health care industry

Contact Info

Product

Resources

About