Formal Institutions and Voluntary CSR / ESG Disclosure: The Role of Institutional Diversity and Firm Size

ABSTRACT This paper explores the interplays between institutional and organisational variables in explaining heterogeneity among firms in CSR/ESG disclosure under voluntary regimes and in different institutional contexts, within the neo‐institutional perspective. Moderating hypotheses hold that the relationship between CSR/ESG and Formal Institutions is affected by stakeholder pressure and firm size. The study uses fixed‐effects multiple linear regression on a sample of 841 MSCI World Index listed companies over the period 2008–2016. Using the Bloomberg ESG disclosure score as the measure of voluntary CSR disclosure, we find that organisational characteristics explain most of the variation in firms' CSR/ESG disclosure, whereas variations in legislative factors at a country level explain less. Further, we show that external stakeholder pressures play a central role in the association between coercive formal institutions and firms' CSR/ESG, as well as firm size. We confirm the normative and mimetic isomorphism towards legitimacy‐seeking attitudes rather than coercive mechanisms in the CSR/ESG domain. The study expands prior research on neo‐institutional forces driving CSR/ESG disclosure. They may not always act as constraints on CSR/ESG disclosure, since companies self‐regulate their voluntary behaviour under global governance. The study also aims to inspire explorations of the consequences of introducing mandatory regulations for nonfinancial CSR/ESG information.