Accounting and Business Research – ESG themed issue

We are delighted to start the 2024 volume of Accounting and Business Research with an issue that contains four articles on environmental, social, and governance (ESG) topics. Accounting and Business Research is committed to the dissemination of high-quality academic research that contributes to our understanding of the role of accounting information in business. This includes ESG-related accounting issues that are receiving increasing attention among policymakers, firms, investors, and academics worldwide. With news associated with climate change, social inequality, and corporate scandals continuing to make headlines, there is widespread and growing recognition that ESG issues significantly impact business and economic activities. As the language of business, accounting information serves crucial functions in reporting, measurement, monitoring, and valuation, and these functions are evolving as the number of stakeholders interested in accounting information grows, and as accounting information extends beyond financial information into non-financial and other ESG related information. In this evolving environment, our understanding about the links between accounting and ESG issues remains limited in many important respects. This themed issue collects four original research articles that are published following the journal’s standard and rigorous review process.

The first article in the issue, De Meyst et al. (2024), is entitled ‘Reducing partner risk: the effect of feedback timing and incentives’. The authors draw on experimental methods to examine how the timing of feedback about ESG target outcomes and the presence of incentives to meet these targets can drive the effort of managers and the willingness of their partners to collaborate. The study focuses on targets based on greenhouse gas emissions and shows that target-meeting incentives may have negative unintended consequences on managerial effort provision and the willingness of their partners to be exposed to risk when the feedback about target outcomes is provided only after a short period. This evidence suggests that ESG targets need to be designed with caution to reduce undesirable externalities.

The second paper, Zhao (2024), is entitled ‘Corporate philanthropy as a response to greater tax enforcement’. The author focuses on the introduction of new tax administration system in China and examines the effect of taxation on corporate donations in socially responsible activity areas such as education, health care, and poverty alleviation. The results show that firms donate more under stricter tax enforcement, especially when they have greater demands for political connections or higher reputational costs. The findings imply that tax policies can be designed to guide firms toward ESG-related activities for wider societal benefit.

In the third paper in the issue, entitled ‘Natural disasters and audit fees’, Perry et al. (2024) use a staggered difference-in-difference design to evaluate whether and how audit pricing considers disaster risk associated with extreme weather and earthquakes. They provide evidence that auditors charge lower fees for firms headquartered in areas affected by natural disasters. Unlike existing studies that tend to show that business risk increases audit fees, this evidence suggests that, under certain circumstances, accounting firms comply with government recommendations to provide relief to disaster affected firms by lowering their service fees.

In the fourth and final paper, entitled ‘Corporate social responsibility disclosure: a topic-based approach’, Hummel et al. (2024) apply textual analysis to compare ESG-related information disclosure by firms in liberal market economies (e.g. US and Canada) and coordinated market economies (e.g. European countries). They show that liberal market economies are more explicit in reporting areas such as human resources, environmental protection, and society at large, while coordinated market economies report more explicitly on parental policies. The study provides implications of how the institutional environment influences variations in ESG related reporting by firms.

We encourage submissions of further research on other ESG-related accounting issues, such as regulatory reforms and policy changes, accounting for climate-related assets, non-financial information measurement and reporting, and the impact on financial and real activities. We welcome studies using various theoretical perspectives and methodologies (quantitative or qualitative). Studies across various jurisdictions are also encouraged. Possible questions include, but are not limited to:

• Do ESG disclosures impact firm value or drive real economic effects?

• How should ESG information be reported or disclosed?

• What are the impacts of ESG disclosures on managerial incentives and decisions?

• To what extent do ESG disclosures influence financial analysts' outputs?

• How is ESG information impacting social equality and justice?

• How do internal stakeholders such as employees and external stakeholders like consumers use and influence ESG disclosures?

• To what extent do ESG disclosures, institutional effects, or regulatory reforms affect firms in emerging economies?