This paper aims to investigate the potential mediating effect of environmental disclosure on the relationship between corporate governance and the disclosure of social information by disaggregating Bloomberg ESG (Environmental-Social-Governance) scores. The polluting level of a company is examined for its potential moderating effect.
The focus is on the S&P 500. A structural equation model (SEM) is proposed that considers the effects of governance board constructs on the voluntary disclosure of social information (S-score) mediated by the voluntary disclosure of environmental information (E-score). The model is fit separately for two groups of companies (high-polluting and low-polluting), and the path coefficients are compared.
Consistent with prior research, board independence, gender diversity, and size positively impact voluntary environmental disclosure; board age is found to have a significant but negative effect. The estimated path coefficient from E-score to S-score is strong, positive, and significant; environmental disclosure fully mediates the relationship between corporate governance and social disclosure. This path coefficient is significantly greater for those companies in the high-polluting group.
The findings indicate that high-polluting companies may engage in increased voluntary disclosure of social information as reputation insurance. E-score fully mediates the relationship between corporate governance and S-score more strongly for high-polluting companies, suggesting this group is more likely to engage in and report on socially responsible behaviors to deflect attention away from environmental performance (i.e. greendeflecting).
