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1. Introduction
Early in the 21st century, well-known cases of financial failures in the USA had a severe negative impact on the US and global economy, raising the emergence of the 2008 global financial crisis. The global financial crisis shook markets international causing an economic problems requiring a high level of intervention by authorities and causing a wide range of social concerns (Nicholson et al., 2011). The financial crisis raised concern regarding farms’ ethical behaviour, accountability risk oversight and capability to strategically attract a wide range of investors (Galbreath, 2013). In addition, it cast doubt on corporate reporting and disclosure as a credible source of information on firms’ going-concern (Alqallaf and Alareeni, 2018).
Issues of disclosure have long been an inherent part of the life of firms. Disclosure is a crucial link in our economies, and the availability of information about companies is essential for investors and other stakeholders to make proper capital allocation choices and avoid any imminent danger. A higher level of disclosure can help attract capital and maintain confidence in stock markets. In contrast, a lower level of disclosure and an unclear picture of firms can lead to manipulation, unethical behaviour and damage of market integrity at a high cost to firms, stakeholders and the economy (OECD, 2004).
Given frequent financial scandals, as part of firms’ strategy and in response to pressure from authorities, NGOs and stakeholders, more firms now strictly comply with environmental, social and other local regulations. Firms want to provide all stakeholders with a clear picture of their corporate responsibility practices and efforts. Consequently, corporate disclosure of environmental, social and governance (ESG) aspects has developed in a variety of dimensions over more than two decades. In addition, a growing number of firms are now engaged in a broad set of ESG disclosure activities, and this important issue has become a topic of much attention.
Meanwhile, the crucial question firms and shareholders must answer is whether ESG disclosure practices can be turned into positive firm performance (FP). Prior research has tried to test the effect of ESG disclosure practices on FP. Most of these studies focus on a single dimension of ESG such as environmental or social disclosure (Smith et al., 2007; Ponnu, 2008; Barnett and Salomon, 2012a,...