Descriptions of variables
| Variable | Name of variable | Explanation |
|---|---|---|
| CSR_PERF | CSR performance | A weighted measure for CSR performance that compares CSR performance across years and industries with the value ranging between 0 and 1. The net score of CSR ratings based on the MSCI ESG KLD STATS data, measured as total CSR strengths minus total CSR concerns based on the dimensions of: the community, diversity, employee relations, the environment, human rights and products, standardized based on year and industry |
| SUSTCOM | Sustainability committee | An indicator variable that equals 1 if a firm has a sustainability committee, and 0 otherwise |
| SUSTPAY | Sustainability-linked CEO compensation contracts | An indicator variable that takes a value of 1 if the CEO's compensation is linked to sustainability targets, and 0 otherwise |
| STAKE | Stakeholder engagement | An indicator variable that takes a value of 1 if the firm has active firm-level stakeholder engagement programs, and 0 otherwise |
| SUSTQUAL | Sustainability reporting quality | An indicator variable that takes a value of 1 if the firm adopts the Global Reporting Initiative (GRI) as a sustainability reporting framework, and 0 otherwise |
| COMSIZE | Committee size | Natural logarithm of the total number of members on the sustainability committee |
| GENDER | Committee members’ gender | Proportion of female members on the sustainability committee relative to total members on the committee |
| AGE | Age of committee members | Natural logarithm of the average age of sustainability committee members |
| COMTEN | Committee tenure | Natural logarithm of the average number of years that committee members have served on the sustainability committee |
| QUAL | Qualifications of committee members | Natural logarithm of the average number of qualifications held by sustainability committee members |
| OVLP | Overlapping of committee members with audit committee members | An indicator variable that equals 1 if any member of the sustainability committee sits on the audit committee in the same firm, and 0 otherwise |
| FSIZE | Firm size | Natural logarithm of the market value of equity at the beginning of each period |
| LEV | Leverage | Proportion of total debt to total assets |
| MB | Market-to-book value | Ratio of market value to book value |
| ROA | Profitability | Ratio of income before extraordinary items to total assets |
| FIN | Financing | Amount of debt or equity capital raised by a firm at the beginning of each fiscal year |
| COMPET | Industry competition | Industry competition is measured as the principal component of: (1) the Herfindahl–Hirschman Index of industry concentration, calculated as the sum of the squared market shares (in sales) of all firms in the industry; (2) the four-firm concentration ratio, calculated as the proportion of the market share of sales of the four largest firms in an industry; and (3) market size, calculated as the number of firms in the industry, following Isidro and Marques (2021). A higher value indicates higher industry competition |
| GLOBAL | Foreign exposure | An indicator variable of 1 if a firm has foreign operations, and 0 otherwise |
| LIQUID | Liquidity | Ratio of the total number of shares traded to the total shares outstanding |
| LITG | Litigation | An indicator variable that equals 1 if a firm operates in a high litigation industry (Standard Industrial Classification [SIC] codes of 2,833–2,836, 3,570–3,577, 3,600–3,674, 5200–5961 and 7,370), and 0 otherwise |
| FAGE | Firm age | Natural logarithm of the total number of years that a firm has been standing in the market |
| CAPEX | Capital expenditure | Ratio of capital expenditure to total assets |
| EM | Earnings management | Absolute value of abnormal earnings, estimated based on the modified Jones’ (1991) model |
| CGOV | Corporate governance | Measure of corporate governance defined as the differences between total number of corporate governance strengths minus total number of corporate governance concerns |
| Variable | Name of variable | Explanation |
|---|---|---|
| CSR performance | A weighted measure for CSR performance that compares CSR performance across years and industries with the value ranging between 0 and 1. The net score of CSR ratings based on the MSCI ESG KLD STATS data, measured as total CSR strengths minus total CSR concerns based on the dimensions of: the community, diversity, employee relations, the environment, human rights and products, standardized based on year and industry | |
| Sustainability committee | An indicator variable that equals 1 if a firm has a sustainability committee, and 0 otherwise | |
| Sustainability-linked CEO compensation contracts | An indicator variable that takes a value of 1 if the CEO's compensation is linked to sustainability targets, and 0 otherwise | |
| Stakeholder engagement | An indicator variable that takes a value of 1 if the firm has active firm-level stakeholder engagement programs, and 0 otherwise | |
| Sustainability reporting quality | An indicator variable that takes a value of 1 if the firm adopts the Global Reporting Initiative (GRI) as a sustainability reporting framework, and 0 otherwise | |
| Committee size | Natural logarithm of the total number of members on the sustainability committee | |
| Committee members’ gender | Proportion of female members on the sustainability committee relative to total members on the committee | |
| Age of committee members | Natural logarithm of the average age of sustainability committee members | |
| Committee tenure | Natural logarithm of the average number of years that committee members have served on the sustainability committee | |
| Qualifications of committee members | Natural logarithm of the average number of qualifications held by sustainability committee members | |
| Overlapping of committee members with audit committee members | An indicator variable that equals 1 if any member of the sustainability committee sits on the audit committee in the same firm, and 0 otherwise | |
| Firm size | Natural logarithm of the market value of equity at the beginning of each period | |
| Leverage | Proportion of total debt to total assets | |
| Market-to-book value | Ratio of market value to book value | |
| Profitability | Ratio of income before extraordinary items to total assets | |
| Financing | Amount of debt or equity capital raised by a firm at the beginning of each fiscal year | |
| Industry competition | Industry competition is measured as the principal component of: (1) the Herfindahl–Hirschman Index of industry concentration, calculated as the sum of the squared market shares (in sales) of all firms in the industry; (2) the four-firm concentration ratio, calculated as the proportion of the market share of sales of the four largest firms in an industry; and (3) market size, calculated as the number of firms in the industry, following | |
| Foreign exposure | An indicator variable of 1 if a firm has foreign operations, and 0 otherwise | |
| Liquidity | Ratio of the total number of shares traded to the total shares outstanding | |
| Litigation | An indicator variable that equals 1 if a firm operates in a high litigation industry (Standard Industrial Classification [SIC] codes of 2,833–2,836, 3,570–3,577, 3,600–3,674, 5200–5961 and 7,370), and 0 otherwise | |
| Firm age | Natural logarithm of the total number of years that a firm has been standing in the market | |
| Capital expenditure | Ratio of capital expenditure to total assets | |
| Earnings management | Absolute value of abnormal earnings, estimated based on the modified | |
| Corporate governance | Measure of corporate governance defined as the differences between total number of corporate governance strengths minus total number of corporate governance concerns |
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