Audit quality, media coverage, environmental, social, and governance disclosure and firm investment efficiency: Evidence from Canada
International Journal of Accounting & Information Management
ISSN: 1834-7649
Article publication date: 13 January 2020
Issue publication date: 14 February 2020
Abstract
Purpose
The purpose of this study is twofold: first, to introduce two determinants of environmental, social and governance (ESG) disclosure transparency, namely, audit quality and public media exposure; and second, to investigate the impact of ESG transparency on firm-level investment efficiency.
Design/methodology/approach
Ordinary least square (OLS) regressions are applied to explore the relationship between the two variables of interest (audit quality and public media exposure) and ESG transparency on a sample of publicly listed Canadian firms during the period 2008 to 2017. Then, an econometric model is used to investigate the association between ESG transparency and investment efficiency under two identified scenarios, under-investment and over-investment.
Findings
Results show that audit quality and public media exposure are two main drivers of ESG transparency, hence, commitment to high-quality audits and exposure to high public media coverage drive firms to disclose more extensive and transparent ESG information. The authors also find a negative association between ESG transparency and firm-level investment inefficiency. Thus, ESG transparency generates influential incremental information that helps mitigate the information asymmetry between firms and stakeholders while fostering better resource allocation through investment efficiency.
Originality/value
This study contributes to the corporate social responsibility (CSR) and ESG literature by identifying audit quality and public media exposure as two determinants of ESG transparency; and by noting that higher ESG transparency has a significant economic effect on capital investment decisions through higher firm-level investment efficiency.
Keywords
Citation
Hammami, A. and Hendijani Zadeh, M. (2020), "Audit quality, media coverage, environmental, social, and governance disclosure and firm investment efficiency: Evidence from Canada", International Journal of Accounting & Information Management, Vol. 28 No. 1, pp. 45-72. https://doi.org/10.1108/IJAIM-03-2019-0041
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited