ESG Disclosure Quality and Performance
Avneet Kaur  1, 2@  , Bin Liu  1@  , Liangbo Ma  1@  , Sandy Suardi  1@  
1 : University of Wollongong [Australia]
2 : University of Wollongong Dubai

We investigate corporate accountability in ESG reporting by analysing the relationship between corporate ESG performance and the quality of ESG disclosures. Utilising a unique dataset comprising environmental (E), social (S), and governance (G) textual information extracted from ASX200 constituents' annual and sustainability reports, along with their websites spanning 2013 to 2021, we employ innovative computerized methods to estimate firm-year level ESG disclosure readability and length scores. These scores serve as proxies for ESG disclosure quality. We find a significant positive association between ESG performance and the readability of environmental and social disclosures, while no such relationship is found for governance disclosures. Moreover, ESG performance is positively related to disclosure length. Our results suggest that superior ESG disclosure quality, characterized by enhanced readability and longer disclosures, correlates with higher ESG performance in environmental and social domains, albeit not in governance. This relationship persists across various model specifications, implying that in the presence of voluntary ESG disclosure frameworks, corporate managers may obscure poor ESG performance by issuing shorter and complex ESG disclosure reports. This study bridges the discretionary disclosures literature, corporate narratives literature, and corporate finance literature, contributing to the burgeoning field of sustainable finance.


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