Converting the skeptic but losing the faithful: An experimental examination of expanding and auditing information in ESG reports

Lyman, Rachel Bracken

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https://hdl.handle.net/2142/124504 Copy

Description

Title

Converting the skeptic but losing the faithful: An experimental examination of expanding and auditing information in ESG reports

Author(s)

Lyman, Rachel Bracken

Issue Date

2024-04-05

Director of Research (if dissertation) or Advisor (if thesis)

Peecher, Mark

Doctoral Committee Chair(s)

Peecher, Mark

Committee Member(s)

• Leiby, Justin
• Mendoza, Kim
• Hotaling, Jared

Department of Study

Accountancy

Discipline

Accountancy

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• Esg
• Assurance
• Single Materiality
• Double Materiality
• Socially Responsible Investing

Language

eng

Abstract

While socially responsible investing (SRI) has soared in recent years, some investors remain skeptical of ESG’s relevance. Despite these differing opinions, we understand little about how SRI preferences impact processing of ESG reporting. Drawing on motivated reasoning, I report an experiment that tests predictions about how two prominent ESG reporting attributes interact with investor SRI affinity. First, companies can choose ESG reporting frameworks that either disclose only financially material activities or all activities material to external stakeholders. I predict and find that retail investors adjust their willingness to invest based on alignment between their directional SRI goals and the company’s chosen ESG reporting framework. Second, companies commonly obtain assurance over only one of several ESG metrics. The introduction of an audited metric alongside unaudited metrics creates a salient disparity in the reliability across metrics, which I call a “reliability gap.” I predict and find that the reliability gap conveys lower ESG commitment, repelling higher SRI affinity investors while reassuring lower SRI affinity investors. One intriguing result is that a common combination of reporting choices designed to demonstrate a company’s ESG commitment – an expansive reporting framework and partial assurance – may win over the SRI skeptic while losing the SRI faithful.

Graduation Semester

2024-05

Type of Resource

Text

Handle URL

https://hdl.handle.net/2142/124504

Copyright and License Information

Copyright 2024 Rachel Lyman

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