Is there a complementary or a substitutive relationship between climate governance and analyst coverage? Its effect on climate disclosure

Abstract

Knowledge of the initiatives that companies are promoting to curb climate change and the impacts resulting from these activities require the disclosure of relevant information that can be used by stakeholders in their decision‐making processes. The objective of this work is to complement previous studies by analysing the effect and type of relationship that exists between internal and market corporate governance mechanisms. We theoretically argue that business transparency related to climate change is explained both by climate governance and by the coverage of the company by financial analysts and that there may be both a complementary and substitutive relationship between the two mechanisms. The results obtained on a global climate governance score show the existence of a substitutive relationship, but the individualised consideration of the components of this score suggests a potential divergent relationship.

Corporate governance perspective on environmental reporting: Literature review and future research agenda

“…Even if some papers provide evidence on both types of governance, they rarely test interactions between them. The few exceptions in our sample include a study by García‐Sánchez et al (2022), who find a substitutive effect between firm‐level climate governance and coverage by financial analysts, highlighting the compensating role of external governance mechanisms. Similarly, Pisano et al (2022) reveal that the association between board characteristics and ER is moderated by the geographic location, while Fei (2022) shows that media exposure has a more pronounced effect on reporting practices of state‐owned than non‐state‐owned firms.…”

“…Similarly, little is known on the impact of market for corporate control on environmental reporting, opening an interesting field for future investigations.4.1.2 | Interactions between firm-level governance and external governance mechanismsSecondly, while the literature on governance determinants of corporate transparency has been substantially growing over the last two decades, studies on the internal and external mechanisms have largely been conducted separately from each other, limiting our understanding on their impact of ER. Even if some papers provide evidence on both types of governance, they rarely test interactions between them.The few exceptions in our sample include a study byGarcía-Sánchez et al (2022), who find a substitutive effect between firm-level climate governance and coverage by financial analysts, highlighting the compensating role of external governance mechanisms. Similarly, Pisano…”

Archival research on sustainability‐related executive compensation. A literature review of the status quo and future improvements

“…Carbon reduction management was not affected (Cordova et al, 2021). Moreover, Garcia‐Sanchez et al (2023) did not find any impact on climate reporting.…”

Do boards care about planetary boundaries? A gender perspective on circular economy disclosures

“…Following previous empirical evidence, we included controlling variables to avoid biased results (Atif et al, 2022; Clarkson et al, 2008; García‐Sánchez, Ali, & Rehman, 2022; Liao et al, 2015; Tingbani et al, 2020; Vitolla et al, 2020). These variables allow the control of business characteristics related to business resources and capabilities, such as García‐Sánchez, Ali, and Rehman (2022) and Vitolla et al (2020). The age of the company (Age) is calculated as the logarithm of the years of the firm's existence from its date of creation.…”

“…The existence of institutional pressures identified in several studies (e.g., García‐Sánchez, Ali, & Rehman, 2022) was associated with the Environmental Policy Rigor Index (EPSIndex), defined as the requirements of environmental policies regarding certain polluting behaviours. This index is the degree of stringency of environmental policy instruments (13 instruments), mainly associated to air pollution or climate (OECD, 2022) and ranges from 0 (not strict) to 6 (maximum stringency).…”