TM - Fatin Adilah Razali Ac 15 - 5

UNIVERSITI TEKNOLOGI MARA
ENVIRONMENTAL, SOCIAL AND

GOVERNANCE (ESG) DISCLOSURE
AND ITS EFFECT ON FIRM'S
PERFORMANCE
FATIN ADILAH BINTI RAZALI
Dissertation submitted in partial fulfilment

of the requirements for the degree of
Master of Accountancy
Faculty of Accountancy
December 2015
AUTHOR'S DECLARATION
I declare that the work in this thesis/dissertation was carried out in accordance with
the regulations of Universiti Teknologi MARA. It is original and is the results of my
own work, unless otherwise indicated or acknowledged as referenced work. This
thesis has not been submitted to any other academic institution or non-academic
institution for any degree or qualification.
I, hereby, acknowledge that I have been supplied with the Academic Rules and
Regulations for Post Graduate, Universiti Teknologi MARA, regulating the conduct of
my study and research.
Name of Student Fatin Adilah Binti Razali

Student I.D. No. 2014299286
Programme Master of Accountancy
Faculty Accountancy
Dissertation Title Environmental, Social and Governance (ESG)
Disclosure and Its Effect on Firm's Performance
Signature of Student
Date December 20
11
ABSTRACT
Environmental, social and governance (ESG) is another branch of corporate social

responsibility, which have gained more attention from corporate businesses and
investors. The new emerging socially responsible investment requires the inclusion of
ESG in the companies' business conduct. The ESG information disclosure practices
might differ across the country's location. Specific regulation in disclosing the
required information is necessary to ensure the information provided will satisfy all
stakeholders especially socially responsible investors. The purpose of this study is to
examine and compare the level of ESG disclosure between two countries under
different ESG disclosure practice requirement. Moreover, this study also examines the
element being prioritize or emphasis under ESG disclosure. In addition, the
relationship between ESG disclosure and firm's performance measured by economic
value added (EVA) is also included in this study. This study is a quantitative study
and it employs top 100 companies each listed in Malaysia and Denmark stock
exchanges. Using a content analysis method on the companies report in 2013 and
comparative analysis (Mann-Whitney U test and Kruskal-Wallis test), the study found
that there is a significant different in ESG disclosure and its elements emphasis in both
countries. Country regulatory background, norms and believe may effect and
influence the level of ESG disclosures and its emphasis. The correlation analysis is
employ to test the relationship between ESG disclosures and firms EVA. The result
found that there is no relationship exists between ESG disclosure and firms EVA.
However, this study considers one-year lag between ESG disclosures in 2013 with
firms performance in 2014.This indicates that the information disclosed today may not
dictate any changes and improvements in the firms' performance in the following
year. Information provided should have significant value to the company and their
investors as ethical business conduct facilitate the company's longevity in the market.
Keywords: Environment, social and governance (ESG), responsible investment,

disclosure practice, country's regulatory background, firm's performance.
in
ACKNOWLEDGEMENTS
Firstly, I would like to thank Allah for the opportunities given by Him to embark my
Master journey and the strength to complete this challenging and long journey. My
gratitude is for my supervisor, Prof Dr Ruhaya Hj Atan for the guidance and advice
given to me throughout the process.
My appreciation for the moral support and understanding received from my family
especially my parents. They taught me to be patient and never easily give up. A
million thanks to my fellow classmates for the assistance and knowledge share
throughout the process.
Finally, I hope this thesis will add value to the knowledge and hence contributes to the
development of knowledge and society. I hope this thesis will benefit those readers
and gain some knowledge in corporate social responsibility field of study. I dedicate
this thesis to all readers who have passion in knowledge and continue seeking for a
new knowledge.
IV
TABLE OF CONTENTS
AUTHOR'S DECLARATION II
ABSTRACT III
ACKNOWLEDGEMENTS IV
TABLE OF CONTENTS V
LIST OF TABLES VIII
LIST OF FIGURES IX
CHAPTER ONE: INTRODUCTION 1

1.1 Introduction 1
1.2 Background Of The Study 1
1.3 Problem Statement 3
1.4 Research Questions 7
1.5 Research Obj ect ives 7
1.6 Significance Ofthe Study 8
1.7 Organization Of The Study 9
1.8 Chapter Summary 9
CHAPTER TWO: LITERATURE REVIEW 11

2.1 Introduction 11
2.2 Countries Reporting Background 11
2.2.1 Malaysia Corporate Social Reporting Background 11
2.2.2 Denmark Reporting B ackground 12
2.3 Environmental, Social And Governance (Esg) 13
2.3.1 Environmental, Social And Governance Disclosure Practices 18
2.3.2 The Link Between Esg Disclosure And Firms Financial
Performance 24
2.3.3 Theoretical Development 27
2.3.4 Hypothesis Development 31
2.4 Conceptual Framework 38
2.5 Chapter Summary 39

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UNIVERSITI TEKNOLOGI MARA

ENVIRONMENTAL, SOCIAL AND

FATIN ADILAH BINTI RAZALI

Dissertation submitted in partial fulfilment

Name of Student Fatin Adilah Binti Razali

Environmental, social and governance (ESG) is another branch of corporate social

Keywords: Environment, social and governance (ESG), responsible investment,

CHAPTER ONE: INTRODUCTION 1

CHAPTER TWO: LITERATURE REVIEW 11

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