Financial Centers And The Relationship Between ESG Disclosure And Firm Performance: Evidence From An Emerging Market

Is the disclosure of non-financial information, such as that related to environmental, social, and governance (ESG), important for firm performance in emerging markets? Does the extent of information asymmetries affect the way stock market participants react towards ESG disclosure? This paper answers these questions and shows that ESG disclosure is negatively related to firm performance in environments with lower information asymmetries. We argue that this negative relationship exists because ESG activities are considered as unrelated costs that reduce shareholders profits and wealth. Our results also show no significant impact of ESG disclosure on firm performance in environments with higher information asymmetries. Given that information is less reliable in environments with lower information asymmetries, it is very much possible that ESG disclosure is not valued by stock market participants.