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ESG disclosure and firm performance before and after IR: the moderating role of governance mechanisms

Research output: Contribution to journalArticle

Purpose: This paper aims to investigate the effect of environmental, social, and governance disclosure (ESGD) on firm performance (FP) before and after the introduction of integrated reporting (IR) further to exploring a potential moderation effect of corporate governance (CG) mechanisms on this relationship.

Design/methodology/approach : Ordinary least squares (OLS) and firm-fixed effects models were estimated based on data related to FTSE 350 between 2009 and 2018. The data has been mainly collected from Bloomberg and Capital IQ. This analysis was supplemented with applying a two-stage least squares (2 SLS) model to address any concerns regarding the expected occurrence of endogeneity problems.

Findings: The results show a positive and significant relationship between ESGD score and firm performance before and after 2013, among a sample of FTSE 350. Furthermore, the study is suggestive of a moderation effect of CG mechanisms (i.e., ownership concentration, gender diversity and board size) on the ESGD-FP nexus. Additionally, this paper finds that firms voluntarily associated with IR have a tendency to achieve better firm financial performance.

Practical implications: The findings of the present study have several policy and practitioner implications. For example, managers may engage in ESGD to enhance their firms’ financial performance by the voluntary involvement in IR, which believed to help investors to rationalise their investment decisions. Likewise, the results reiterate the crucial need to integrate more social, environmental and economic regulations to promote sustainability in the UK. The paper also offers a systematic picture for policymakers in the UK as well as future researchers.

Social implications: The findings of this paper indicate that IR plays a significant role in the relationship between ESGD and FP, where IR firms seemed to be achieving better FP as compared with their non-IR counterparts. This implies that stakeholders may have played a magnificent effort to encourage firms’ voluntary engagement in IR in the UK.

Originality/value: To the best of the authors’ knowledge, this is the first study to explore the potential moderating effect of ownership concentration, gender diversity and board size on the relationship between ESGD and FP and to examine whether firms’ voluntary involvement in IR can lead to better FP after the introduction of IR in 2013 in the UK.
Original languageEnglish
JournalInternational Journal of Accounting & Information Management
Publication statusAccepted for publication - 31 Dec 2019


  • IJAIM-09-2019-0108.R1 - Revised version for pure 1

    Rights statement: The embargo end date of 2050 is a temporary measure until we know the publication date. Once we know the publication date the full text of this article will be able to view shortly afterwards.

    Accepted author manuscript (Post-print), 881 KB, PDF document

    Due to publisher’s copyright restrictions, this document is not freely available to download from this website until: 1/01/50

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