Corporate characteristics and ESG disclosures in Malaysian public-listed companies

Abstract

Companies are changing the way business is conducted to contribute to the betterment of society holistically. Corporate disclosures relating to sustainability has increased intensely to respond to the increased demand for sustainability data from stakeholders. Corporate characteristics may influence the degree of disclosure of sustainability information. Using 285 observations from Malaysian public-listed companies, from 2014 to 2018, the study examines the influence of specific corporate characteristics on the disclosure of sustainability practices. The study applies two-stage least square regression analysis to validate the hypotheses and models. Earnings per shares, return on equity, company size and market capitalization are used as the proxies for corporate characteristics and the Combined Economic, Social and Governance (ESG) Score as the proxy for sustainability practices disclosure measure. The results show that the return on equity and market capitalisation are significantly related to the level of disclosure of sustainability practices. Thus, return on equity and market capitalisation have an impact on the company's level of disclosure of sustainability practices. The implication to practice is that a well-performing corporate with large market capitalisation may actively adopt sustainability practices as a strategy rather than merely comply with regulatory requirements. Profitable companies with large market capitalisation should invest substantially in implementing sustainable practices to achieve lower operating costs and higher yield in the long-term. This study provides insights into the role of corporate characteristics that support the efficacy of sustainability reporting to enhance shareholder value.