Do media coverage and audit quality of US companies affect their Environmental, Social and Governance transparency?

Abstract

Purpose

The purpose of this paper was to study the direct impact of audit quality on environmental, social and governance (ESG) transparency. It aimed also to investigate the moderating effect of media coverage on the relationship between audit quality and ESG transparency in the USA.

Design/methodology/approach

The sample consisted of US companies listed in the Standard and Poor’s 500 Stock Index between 2010 and 2019. The Thomson Reuters database was used to collect ESG disclosure scores and governance information. The authors applied multiple panel data regressions.

Findings

The results showed that audit quality has a direct positive effect on ESG transparency. The findings also showed that the high exposure to public media by firms, the more they commit to high audit quality leading to disclose more transparent ESG information.

Research limitations/implications

The results illustrated the significance of an external audit on an organization’s ESG report. Second, improving data quality has significant consequences not only for rating agencies but also for investors, businesses and researchers. These steps are required to increase the information content of ESG ratings.

Originality/value

The findings demonstrated that third-party external verification improves the dependability of nonfinancial reporting, hence bridging the confidence gap between corporations and the market regarding sustainability reporting.

Citation

Moalla, M. and Dammak, S. (2023), "Do media coverage and audit quality of US companies affect their Environmental, Social and Governance transparency?", Journal of Financial Reporting and Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-09-2022-0353