IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v16y2024i13p5290-d1419637.html
   My bibliography  Save this article

Sustainability Reporting and Market Uncertainty: The Moderating Effect of Carbon Disclosure

Author

Listed:
  • Ahmed Saber Moussa

    (Customs Authority, Ministry of Finance Egypt, Nasr City 11635, Cairo, Egypt)

  • Mahmoud Elmarzouky

    (St Andrews Business School, University of St Andrews, The Gateway, North Haugh, St Andrews KY16 9RJ, UK)

Abstract

This research examines how ESG disclosure influences market uncertainty through carbon disclosure. It uses a 10-year dataset from 2012 to 2021 of non-financial U.K. companies in the FTSE All-Share index. This study employs four regression methods to scrutinize the interplay between ESG disclosure, carbon disclosure, and market uncertainty. The research findings uncover a notable reduction in market uncertainty associated with ESG disclosure, aligning with the Information Asymmetry Theory. Interestingly, this study also uncovers that carbon disclosure amplifies this negative relationship, a finding that resonates with the Signaling Theory. These results hold true across various measures of ESG and market uncertainty. This study enriches the sustainability reporting literature with implications for theory and practice. It extends Information Asymmetry and Signaling Theories to U.K. non-financial firms, emphasizing the need for more research on sustainability disclosure. It underscores the role of ESG and carbon disclosure in reducing cost of capital, enhancing firm value, and boosting investor confidence. It calls for transparent ESG reporting by managers, regulatory promotion of such disclosures, and stakeholder utilization of these to evaluate a firm’s impact and contribution to the SDGs, fostering collaboration on sustainability. This study offers key insights for stakeholders such as managers, investors, regulators, researchers, policy makers, and educators in the realm of sustainability reporting and market dynamics.

Suggested Citation

  • Ahmed Saber Moussa & Mahmoud Elmarzouky, 2024. "Sustainability Reporting and Market Uncertainty: The Moderating Effect of Carbon Disclosure," Sustainability, MDPI, vol. 16(13), pages 1-18, June.
    • Handle: RePEc:gam:jsusta:v:16:y:2024:i:13:p:5290-:d:1419637
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/16/13/5290/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/16/13/5290/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bartov, Eli & Gul, Ferdinand A. & Tsui, J.S.L.Judy S. L., 2000. "Discretionary-accruals models and audit qualifications," Journal of Accounting and Economics, Elsevier, vol. 30(3), pages 421-452, December.
    2. Syed Mithun Ali & Andrea Appolloni & Fausto Cavallaro & Idiano D’Adamo & Assunta Di Vaio & Francesco Ferella & Massimo Gastaldi & Muhammad Ikram & Nallapaneni Manoj Kumar & Michael Alan Martin & Abdul, 2023. "Development Goals towards Sustainability," Sustainability, MDPI, vol. 15(12), pages 1-11, June.
    3. Rachel N. Birkey & Giovanna Michelon & Dennis M. Patten & Jomo Sankara, 2016. "Does assurance on CSR reporting enhance environmental reputation? An examination in the U.S. context," Accounting Forum, Taylor & Francis Journals, vol. 40(3), pages 143-152, September.
    4. Colin Haslam & John Butlin & Tord Andersson & John Malamatenios & Glen Lehman, 2014. "Accounting for carbon and reframing disclosure: A business model approach," Accounting Forum, Taylor & Francis Journals, vol. 38(3), pages 200-211, September.
    5. Tim Loughran & Bill Mcdonald, 2011. "When Is a Liability Not a Liability? Textual Analysis, Dictionaries, and 10‐Ks," Journal of Finance, American Finance Association, vol. 66(1), pages 35-65, February.
    6. Lee, Lung-fei, 2007. "GMM and 2SLS estimation of mixed regressive, spatial autoregressive models," Journal of Econometrics, Elsevier, vol. 137(2), pages 489-514, April.
    7. Doupnik, Timothy S. & Richter, Martin, 2003. "Interpretation of uncertainty expressions: a cross-national study," Accounting, Organizations and Society, Elsevier, vol. 28(1), pages 15-35, January.
    8. Haslam, Colin & Butlin, John & Andersson, Tord & Malamatenios, John & Lehman, Glen, 2014. "Accounting for carbon and reframing disclosure: A business model approach," Accounting forum, Elsevier, vol. 38(3), pages 200-211.
    9. Ahmed Saber Moussa & Mahmoud Elmarzouky, 2023. "Does Capital Expenditure Matter for ESG Disclosure? A UK Perspective," JRFM, MDPI, vol. 16(10), pages 1-19, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Binh Bui & Carolyn Fowler, 2022. "Carbon controls in a New Zealand electricity utility: An application of theoretical triangulation," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(4), pages 4423-4451, December.
    2. Khaled Alsaifi & Marwa Elnahass & Abdullah M. Al-Awadhi & Aly Salama, 2022. "Carbon disclosure and firm risk: evidence from the UK corporate responses to climate change," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 12(3), pages 505-526, September.
    3. Meenakshi Sharma & Rajesh Kaushal & Prashant Kaushik & Seeram Ramakrishna, 2021. "Carbon Farming: Prospects and Challenges," Sustainability, MDPI, vol. 13(19), pages 1-15, October.
    4. Abbasi, Kaleemullah & Alam, Ashraful & Borhan Uddin Bhuiyan, Md. & Tariqul Islam, Md, 2024. "Does female director expertise on audit committees matter for carbon disclosures? Evidence from the United Kingdom," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 55(C).
    5. Erli Dan & Jianfei Shen & Yiwei Guo, 2023. "Corporate Sustainable Growth, Carbon Performance, and Voluntary Carbon Information Disclosure: New Panel Data Evidence for Chinese Listed Companies," Sustainability, MDPI, vol. 15(5), pages 1-27, March.
    6. Jaeschke, Reemda & Lopatta, Kerstin & Yi, Cheong, 2018. "Managers’ use of language in corrupt firms’ financial disclosures: Evidence from FCPA violators," Scandinavian Journal of Management, Elsevier, vol. 34(2), pages 170-192.
    7. Fan, Hanlu & Tang, Qingliang & Pan, Lipeng, 2021. "An international study of carbon information asymmetry and independent carbon assurance," The British Accounting Review, Elsevier, vol. 53(1).
    8. Samuel Tang & David Demeritt, 2018. "Climate Change and Mandatory Carbon Reporting: Impacts on Business Process and Performance," Business Strategy and the Environment, Wiley Blackwell, vol. 27(4), pages 437-455, May.
    9. Khaled Alsaifi & Marwa Elnahass & Aly Salama, 2020. "Carbon disclosure and financial performance: UK environmental policy," Business Strategy and the Environment, Wiley Blackwell, vol. 29(2), pages 711-726, February.
    10. Rong He & Le Luo & Abul Shamsuddin & Qingliang Tang, 2022. "Corporate carbon accounting: a literature review of carbon accounting research from the Kyoto Protocol to the Paris Agreement," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(1), pages 261-298, March.
    11. Haslam Colin & Hoinaru Razvan & Daniel Buda, 2019. "Accounting for the future: How will corporate business models deliver sustainability?," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 13(1), pages 817-828, May.
    12. Perdichizzi, Salvatore & Buchetti, Bruno & Cicchiello, Antonella Francesca & Dal Maso, Lorenzo, 2024. "Carbon emission and firms’ value: Evidence from Europe," Energy Economics, Elsevier, vol. 131(C).
    13. Butler, Marty & Leone, Andrew J. & Willenborg, Michael, 2004. "An empirical analysis of auditor reporting and its association with abnormal accruals," Journal of Accounting and Economics, Elsevier, vol. 37(2), pages 139-165, June.
    14. Gu, Chen & Kurov, Alexander & Wolfe, Marketa Halova, 2018. "Relief Rallies after FOMC Announcements as a Resolution of Uncertainty," Journal of Empirical Finance, Elsevier, vol. 49(C), pages 1-18.
    15. Fereshteh Mahmoudian & Johnny Jermias, 2022. "The influence of governance structure on the relationship between pay ratio and environmental and social performance," Business Strategy and the Environment, Wiley Blackwell, vol. 31(7), pages 2992-3013, November.
    16. Müller, Karsten, 2020. "German forecasters' narratives: How informative are German business cycle forecast reports?," Working Papers 23, German Research Foundation's Priority Programme 1859 "Experience and Expectation. Historical Foundations of Economic Behaviour", Humboldt University Berlin.
    17. Yong Bao & Xiaotian Liu & Lihong Yang, 2020. "Indirect Inference Estimation of Spatial Autoregressions," Econometrics, MDPI, vol. 8(3), pages 1-26, September.
    18. Aaryan Gupta & Vinya Dengre & Hamza Abubakar Kheruwala & Manan Shah, 2020. "Comprehensive review of text-mining applications in finance," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-25, December.
    19. Yan Luo & Linying Zhou, 2020. "Textual tone in corporate financial disclosures: a survey of the literature," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 17(2), pages 101-110, September.
    20. Shan Lu & Peng Wu & Lei Gao & Richard Gifford, 2023. "Are State-Owned Enterprises Equally Reliable Information Suppliers? An Examination of the Impacts of State Ownership on Earnings Management Strategies of Chinese Enterprises," Mathematics, MDPI, vol. 11(4), pages 1-26, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:16:y:2024:i:13:p:5290-:d:1419637. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.