Effects of Environment, Social, and Governance (ESG) Disclosures on ESG Scores: Investigating the Role of Corporate Governance for Publicly Traded Turkish Companies

Kartal M. T., Taşkın Yeşilova F. D., Shahbaz M., KILIÇ DEPREN S., PATA U. K.

JOURNAL OF ENVIRONMENTAL MANAGEMENT, vol.368, 2024 (SCI-Expanded) identifier identifier identifier

  • Publication Type: Article / Article
  • Volume: 368
  • Publication Date: 2024
  • Doi Number: 10.1016/j.jenvman.2024.122205
  • Journal Name: JOURNAL OF ENVIRONMENTAL MANAGEMENT
  • Journal Indexes: Science Citation Index Expanded (SCI-EXPANDED), Scopus, Academic Search Premier, International Bibliography of Social Sciences, PASCAL, Aerospace Database, Agricultural & Environmental Science Database, Aqualine, Aquatic Science & Fisheries Abstracts (ASFA), BIOSIS, CAB Abstracts, Communication Abstracts, Environment Index, Geobase, Greenfile, Index Islamicus, Metadex, Pollution Abstracts, Public Affairs Index, Veterinary Science Database, Civil Engineering Abstracts
  • Azerbaijan State University of Economics (UNEC) Affiliated: Yes

Abstract

The world has experienced climate-related issues, which increase the importance of ESG disclosures and corporate governance (CG) of companies, which take place at the heart of economies. Therefore, improving ESG disclosures and CG practices becomes significant to combat climate change at the company level. Considering that Turkiye restructured ESG disclosures in 2022, this study investigates the role of CG on the nexus between ESG scores of publicly traded companies (PTC) and ESG reports. So, the study analyzes 102 PTC (full sample), 51 PTC in Borsa Istanbul Corporate Governance Index (in-sample), and the remaining 51 PTC (out-sample) using ESG disclosures of 2022 and applying novel super learner (SL) algorithm. Our results show that (i) SL has a higher prediction performance reaching similar to 94.3%; (ii) the environment (governance) layer has the highest (lowest) total relative importance (contribution) to ESG scores in all samples; (iii) C8, S6, and E5 are the most important ESG principles in the full sample, in-sample, and out-sample, respectively; (iv) the contribution of each ESG principles to the total ESG scores varies by sample; (v) CG plays a smoothing role for the relative importance of each ESG principle, while the relative importance in the out-sample shows much higher volatility. Overall, the study reveals the non-linear contributions of ESG principles on ESG scores and suggests that PTC should prioritize highly important ESG principles, consider the moderating role of CG on the link between ESG scores and ESG disclosures, and use ESG disclosures as a strategic tool to develop ESG scores and disclosures.