ESG disclosure inconsistency and tail risk

Abstract

This study examines whether inconsistencies in Environmental, Social, and Governance (ESG) information across disclosure venues affect firm-level tail risk using a dataset of 9,236 firm-year observations from 2006-2024. Results reveal that firms with greater ESG information inconsistency between mandatory annual reports and voluntary earnings call transcripts exhibit significantly higher tail risk. A one-standard-deviation increase in ESG inconsistency corresponds to a 5.5 basis point increase in Expected Shortfall (5%), representing approximately 9.0% of the sample mean. This effect persists after controlling for actual ESG performance levels, suggesting that disclosure quality represents an independent risk factor. Cross-sectional analysis reveals the relationship is particularly pronounced among larger firms and those in high ESG materiality industries, consistent with greater stakeholder scrutiny and strategic disclosure management across multiple audiences.