Economic policy uncertainty and environmental, social and governance (ESG) disclosure: the moderating effects of board network centrality and political connections
Abstract
Purpose
This study aims to examine the relationship between economic policy uncertainty (EPU) and environmental, social and governance (ESG) disclosure and the moderating role of board network centrality and political connections on the nexus between EPU and ESG.
Design/methodology/approach
Using a sample of the UK Financial Times Stock Exchange (FTSE) 350 firms during 2007 to 2018, this study examines the relationship between EPU and the ESG disclosure and the moderating effects of board centrality and board political connections using multivariate regression analysis.
Findings
The results show that firms tend to increase their ESG disclosure when EPU rises. The results also reveal that EPU is negatively associated with firms’ financial performance and ESG performance is less evident for firms with higher ESG disclosure scores and is observed only when board centrality is relatively low and the political connections are absent. The study finds further evidence to support the hypotheses during periods of heightened conflicts (i.e. global financial crisis and the Brexit referendum).
Practical implications
This study offers practical insights for corporate managers who attempt to preserve and enhance their firms’ competitive advantages via maintaining its stakeholders support through greater ESG disclosure during heightened EPU periods.
Originality/value
By integrating the resource-based view (RBV) and the signaling theory, this study extends the signaling theory and RBV by examining the relationship between EPU and ESG disclosure as a signal to its stakeholders and information advantages that board centrality and political connections bring to the company to reduce information asymmetry between the firms and its stakeholders during EPU.
Keywords
Acknowledgements
Harjoto acknowledges the Denney Academic Chair 2019–2021 research endowment for the financial support and release time for this research project. The authors acknowledge Victor Tsao and the Tsao Family Foundation for their financial support for the Bloomberg terminal at the Pepperdine Graziadio Business School, which allows the authors to conduct this research. Tsao Family Foundation financial support for the Bloomberg terminal at the Pepperdine Graziadio Business School has generated many groundbreaking research projects.
Citation
Harjoto, M.A. and Wang, Y. (2024), "Economic policy uncertainty and environmental, social and governance (ESG) disclosure: the moderating effects of board network centrality and political connections", Corporate Governance, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/CG-08-2023-0349
Publisher
:Emerald Publishing Limited
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