Proceedings of Annual South Africa Business Research Conference
11 - 12 January 2016, Taj Hotel, Cape Town, South Africa, ISBN: 978-1-922069-95-5
The Value Relevance of Environmental, Social and Corporate
Governance Disclosures in the US Transportation Sector
Jonathan Nelson, Antoinette Flynn** and John McCarthy
In recent years, voluntary reporting and disclosures of Environmental, Governance, and
Social (ESG) scores by organisations have increased in importance and relevance to a
wide array of stakeholders, not only within the business community, but throughout the
broader social environment. Numerous studies have firmly established the association
between ESG disclosures and positive financial performance and have shown that certain
connections indeed exist between the vague notion of responsibility and firm financial value
or profitability. Although entirely voluntary, the mere disclosure of ESG scores presumably
purports to indicate an inherent consciousness of social obligation on the part of the
reporting firm. However, the novelty of voluntary reporting coupled with its inherent
subjectivity both in content and in audience impact, raises critical questions regarding the
true value of such disclosures.
This research focuses on the US transportation sector between 2007 and 2014 to examine
the relative importance of the levels of ESG disclosure. Disclosure in its entirety,
understood through the empirical framework and findings of Barnett and Salomon (2012),
underpins this investigation into the usefulness of complete disclosure practices by
managers and firms. We employ generalized linear modelling to test the association
between ESG disclosing firm-year observations and firm value, between 2007 and 2014.
We further divide our sample into ESG clusters, according to their ESG score percentiles.
We conclude that ESG reporting is significant at the upper percentiles of ESG performance,
with significant statistical differences in medians between clusters. Overall, we infer that
complete ESG reporting practices do benefit managers and firms, but only at a higher level
of ESG score performance.
Field of Research: Accounting track
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Jonathan Nelson,Department of Management and Marketing, Kemmy Business School, University of
Limerick, Castletroy, Limerick, Ireland.
Dr. Antoinette Flynn**, Department of Accounting and Finance, Kemmy Business School, University of
Limerick, Castletroy, Limerick, Ireland, Tel: 00353 061 202106
Email: antoinette.flynn@ul.ie
Dr. John McCarthy, Department of Management and Marketing, Kemmy Business School, University of
Limerick, Castletroy, Limerick, Ireland, Tel: 00353 061 202183
Email: john.mccarthy@ul.ie
**Corresponding author