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

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.

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

Dissertation

Discipline thesis:degree_discipline

Accountancy

Grantor

University of Illinois at Urbana-Champaign

Year dc:date

2024

Author dc:creator

• Lyman, Rachel Bracken

Contributors dc:contributor

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

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

Statement dc:rights

• Copyright 2024 Rachel Lyman

Language dc:language

eng, en

Handle dc:identifier

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

OAI identifier oai:identifier

oai:www.ideals.illinois.edu:2142/124504