Transparency and information asymmetry in the financial market: Strategic dependencies between sustainability disclosure, SDG achievement and financial and information efficiency
-
DOIhttp://dx.doi.org/10.21511/imfi.20(4).2023.11
-
Article InfoVolume 20 2023, Issue #4, pp. 127-137
- Cited by
- 387 Views
-
129 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
In today’s financial world, the pursuit of sustainable development has evolved from an ethical imperative to a strategic necessity. It has spurred corporations to enhance transparency regarding their non-financial and responsible or ESG practices. This paper aims to formalize the strategic dependencies between sustainability disclosure, SDG achievement, and the financial and information efficiency of the financial market. The research methods are normality tests, canonical correlation analysis, and multivariate multiple and univariate regression analysis. The object of the study is 137 countries. The time period is 2022. The results confirmed that a positive strong correlation was found between sustainability disclosure and the achievement of the SDGs on the one hand and financial and information efficiency of the financial market on the other. Identifying the direction of the relationship also confirmed two-way positive dependencies between the indicators, in particular, the SDG Index will have the most significant impact on the growth of GDP per capita, the change in the Economic Sustainability Competitiveness Index on the growth of the United Nations Global Compact participants. The specified connection can be used as the basis for the formation of the concept of ensuring transparency and leveling information asymmetry in the activities of enterprises.
- Keywords
-
JEL Classification (Paper profile tab)Q01, E44
-
References41
-
Tables7
-
Figures1
-
- Figure 1. Relationships between sustainability disclosure, SDG achievement and financial and information efficiency of the financial market within the CCA
-
- Table 1. Input data characteristics
- Table 2. Descriptive statistics for the input dataset
- Table 3. Evaluation of canonical functions
- Table 4. Estimation of standardized canonical coefficients
- Table 5. Evaluation of canonical correlation coefficients
- Table 6. Results of multivariate multiple and univariate regression
- Table A1. Geography of the sample
-
- Adrangi, B., & Kerr, L. (2022). Sustainable Development Indicators and Their Relationship to GDP: Evidence from Emerging Economies. Sustainability, 14, 658.
- Afolabi, H., Ram, R., & Rimmel, G. (2022). Harmonization of Sustainability Reporting Regulation: Analysis of a Contested Arena. Sustainability, 14(9), 5517. MDPI AG.
- Ahmad, N., Mobarek, A., & Roni, N. N. (2021). Revisiting the impact of ESG on financial performance of FTSE350 UK firms: Static and dynamic panel data analysis. Cogent Business and Management, 8(1), 1900500.
- Akerlof, G. A. (1970). The Market for “Lemons”: Quality Uncertainty and the Market Mechanism. The Quarterly Journal of Economics, 84(3), 488-500.
- Arrow, K. J. (1965). Uncertainty and the Welfare Economics of Medical Care: Reply (The Implications of Transaction Costs and Adjustment Lags). The American Economic Review, 55(1/2), 154-158.
- Chen, Z., & Xie, G. (2022). ESG disclosure and financial performance: Moderating role of ESG investors. International Review of Financial Analysis, 83, Article number 102291.
- DasGupta, R. (2022). Financial performance shortfall, ESG controversies, and ESG performance: Evidence from firms around the world. Finance Research Letters, 46, 102487.
- Davies, P. A., Dudek, P. M., & Wyatt, K. S. (2020). Recent developments in ESG reporting. In Values at Work: Sustainable Investing and ESG Reporting (pp. 161-179).
- Del-Aguila-Arcentales, S., Alvarez-Risco, A., Jaramillo-Arévalo, M., De-la-Cruz-Diaz, M., & Anderson-Seminario, M. (2022). Influence of Social, Environmental and Economic Sustainable Development Goals (SDGs) over Continuation of Entrepreneurship and Competitiveness. Journal of Open Innovation: Technology, Market, and Complexity, 8(2), 73.
- Diwan, H., & Amarayil Sreeraman, B. (2023). From financial reporting to ESG reporting: a bibliometric analysis of the evolution in corporate sustainability disclosures. Environment, Development and Sustainability.
- Dumrose, M., Rink, S., & Eckert, J. (2022). Disaggregating confusion? The EU Taxonomy and its relation to ESG rating. Finance Research Letters, 48.
- Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2019). Multivariate Data Analysis (7th ed.).
- Hardoon, D. R., Szedmak, S., & Shawe-Taylor, J. (2004). Canonical Correlation Analysis: An Overview with Application to Learning Methods. Neural Computation, 16(12), 2639-2664.
- Hotelling, H. (1936). Relations Between Two Sets of Variates. Biometrika, 28(3/4), 321-377.
- Huang, Y. S., Li, M., & Chen, C. R. (2019). Financial market development, market transparency, and IPO performance. Pacific Basin Finance Journal, 55, 63-81.
- Khaled, R., Ali, H., & Mohamed, E. K. A. (2021). The Sustainable Development Goals and corporate sustainability performance: Mapping, extent, and determinants. Journal of Cleaner Production, 311, 127599.
- Kim, T. K., & Cipolla, R. (2009). Canonical correlation analysis of video volume tensors for action categorization and detection. IEEE transactions on pattern analysis and machine intelligence, 31(8), 1415-1428.
- KPMG (2022). Regulatory Barometer.
- Lokuwaduge, C. S. D. S., & De Silva, K. M. (2022). ESG Risk Disclosure and the Risk of Greenwashing. Australasian Accounting, Business and Finance Journal, 16(1), 146-159.
- Lopatta, K., Kaspereit, T., Tideman, S. A., & Rudolf, A. R. (2022). The moderating role of CEO sustainability reporting style in the relationship between sustainability performance, sustainability reporting, and cost of equity. Journal of Business Economics, 92(3), 429-465.
- Makarenko, I., & Makarenko, S. (2022). Multi-level benchmark system for sustainability reporting: EU experience for Ukraine. Accounting and Financial Control, 4(1), 41-48.
- Matos, P. (2020). ESG and Responsible Institutional Investing Around the World: A Critical Review. SSRN Electronic Journal.
- Orzes, G., Moretto, A. M., Moro, M., Rossi, M., Sartor, M., Caniato, F., & Nassimbeni, G. (2020). The impact of the United Nations global compact on firm performance: A longitudinal analysis. International Journal of Production Economics, 227, 107664.
- Osobajo, O. A., Oke, A., Lawani, A., Omotayo, T. S., Ndubuka-McCallum, N., & Obi, L. (2022). Providing a Roadmap for Future Research Agenda: A Bibliometric Literature Review of Sustainability Performance Reporting (SPR). Sustainability (Switzerland), 14(14), 8523.
- Pasko, O., Chen, F., Kuts, T., Sharko, I., & Ryzhikova, N. (2022). Sustainability reporting nexus to corporate governance in scholarly literature. Environmental Economics, 13(1), 61-78.
- Pasko, O., Chen, F., Oriekhova, A., Brychko, A., & Shalyhina, I. (2021). Mapping the literature on sustainability reporting: A bibliometric analysis grounded in Scopus and Web of Science Core Collection. European Journal of Sustainable Development, 10(1), 303-322.
- Plastun, A., Makarenko, I., Kravchenko, O., Ovcharova, N., & Oleksich, Z. (2019a). ESG disclosure regulation: In search of a relationship with the countries’ competitiveness. Problems and Perspectives in Management, 17(3), 76-88.
- Plastun, A., Makarenko, I., Yelnikova, Y., & Makarenko, S. (2019b). Environmental, social, and governance investment standardization: Moving towards a sustainable economy. Environmental Economics, 10(1), 12-22.
- Radu, O. M., Dragomir, V. D., & Ionescu-Feleagă, L. (2023). The Link Between Country Competitiveness, Corporate ESG Performance, and the UN Sustainable Development Goals. In Proceedings of the 18th International Conference Accounting and Management Information Systems (AMIS 2023) (pp. 276-296).
- Sachs, J. D., Lafortune, G., Fuller, G., & Drumm, E. (2023). Implementing the SDG Stimulus. Sustainable Development Report 2023. Paris: SDSN, Dublin: Dublin University Press.
- Sherry, A., & Henson, R. K. (2005). Conducting and interpreting canonical correlation analysis in personality research: a user-friendly primer. Journal of Personality Assessment, 84(1), 37-48.
- Singhania, M., & Saini, N. (2021). Quantification of ESG Regulations: A Cross-Country Benchmarking Analysis. Vision: The Journal of Business Perspective.
- Soni, T. K. (2023). Demystifying the relationship between ESG and SDG performance: Study of emerging economies. Investment Management and Financial Innovations, 20(3), 1-12.
- Stiglitz, J. E., & Weiss, A. (1981). Credit Rationing in Markets with Imperfect Information. The American Economic Review, 71(3), 393-410.
- Suresha, B., Srinidhi, V. R., Dippi, Verma, Manu K. S., & Krishna T. A. (2022). The impact of ESG inclusion on price, liquidity and financial performance of Indian stocks: Evidence from stocks listed in BSE and NSE ESG indices. Investment Management and Financial Innovations, 19(4), 40-50.
- Taylor, T. L., & Collins, S. (2022). Ingraining sustainability in the next era of ESG investing. Deloitte UK.
- United Nations. (2015). Addis Ababa action agenda of the Third International Conference on Financing for Development: General Assembly resolution 69/313. New York: United Nations.
- United Nations. (2023). Progress towards the Sustainable Development Goals: Towards a Rescue Plan for People and Planet. Report of the Secretary-General (Special Edition). General Assembly and Economic and Social Council, A/78/XX-E/2023/XX.
- UNPRI. (2023). Regulation database.
- Yu, E. P.-y., Luu, B. V., & Chen, C. H. (2020). Greenwashing in environmental, social, and governance disclosures. Research in International Business and Finance, 52, 101192.
- Zenkina, I. (2023). Ensuring the transparency of ESG reporting based on the development of its standardization. E3S Web of Conferences, 37, 05077.