Unpacking ESG Risk Disclosure Determinants: The Role of Stakeholder, Shareholder, and Managerial Influence

This study examines the key drivers of ESG risk disclosure, focusing on stakeholders, shareholders, and management. While legitimacy theory suggests firms under scrutiny should disclose more ESG information to secure stakeholder support, findings show these firms often provide lower-quality disclosures, potentially reducing accountability. This indicates that companies may perceive ESG risk reporting as a threat rather than an opportunity. Shareholders, analyzed through agency theory, are expected to push for better ESG disclosures if aligned with financial interests or personal values. However, no significant relationship was found between board characteristics and ESG disclosures, suggesting limited shareholder influence. Management incentives play a notable role, as firms with sustainability-linked executive compensation disclose higher-volume ESG risk information, supporting evidence that such incentives enhance ESG performance.