There is an evolving trend of pursuing the transfer to sustainable development. Owing to this trend, and alongside the increasing monitoring by society, companies are progressively considering this new position in the capital market. Corporate governance mechanisms and environmental, social, and governance (ESG) activities have received extensive consideration. Using a sample of Saudi listed companies, this study examines the association between board composition (size, independence, and gender diversity) and ESG disclosure moderated by corporate governance reforms. Our reported results confirm that the size of a board and its level of independence have positive and significant impacts on ESG disclosure. Moreover, board gender diversity is found to be positively but insignificantly related with ESG disclosure. When the individual dimensions of ESG are considered, the results verify the significant role of board size and board independence and the insignificant impact of board gender diversity in environmental and social disclosures. Interestingly, all measures of board composition have a positive and significant impact on the governance disclosure score. The results also show that reforms of Saudi corporate governance positively and significantly moderate the board size and board independence–ESG relationship. Our results demonstrate that the enhancement of companies’ corporate governance will increase their ESG disclosures. This study offers perceptions from the outlook of a developing economy, Saudi Arabia, and presents theoretical and managerial implications for policymakers and investors.

Earnings management continues to be a critical ethical concern faced by companies. The management that conducts earnings manipulation may adopt environmental, social, and governance (ESG) activities to safeguard themselves from stakeholders. Engagement in ESG is sometimes viewed as a type of managerial misconduct and as a means to cover up manipulative practices. Thus, the key aim of our study is to investigate the association between ESG disclosure and earnings management levels in the context of listed companies in Saudi Arabia. We also investigate the influence of financial distress on the above association. Data were obtained from 304 company-year observations for the years 2014–2021. The results showed that ESG disclosure had a positive and statistically significant effect on earnings management. In addition, financial distress significantly and positively enhanced this effect. This shows that financially distressed companies tend to disclose more ESG practices and engage in earnings management. Moreover, through the division of the three ESG components—environmental, social, and governance—the impacts of both environmental and social factors on earnings management were found to be positive and robust, while the governance score was negative. The results obtained using diverse regression techniques and further tests were robust. This study makes several contributions to the ESG and earnings management literature. It also minimizes the literature gap by focusing on the influences of financial distress on the ESG–earnings management relationship. The study findings have implications for several stakeholder groups, including regulators, decision makers, investors, and auditors. In particular, it warns policymakers that some practices focused on ESG enhancements may be a tool for preventing other questionable practices.

Environmental sustainability represents nowadays a significant factor for business sector. Firms carry out many initiatives to develop environmental practices. Investors increasingly consider environmental discloser by firms and integrate this disclosure into the investment decision-making process. Using a database of Saudi listed firms, this study adds to the literature by examining the relationship between the environmental sustainability disclosure and stock return and whether this relationship is moderated by the financial constraints. We find that the environmental sustainability disclosure has significant and negative impact on stock return, indicating that investors do not consider environmental disclosure when valuing the stocks. Furthermore, our results propose that the negative impact of environmental disclosure on stock return is more evident in firms with financial constraints. This study provides managerial implications for regulatory authorities, firms and investors. The environmental practices can be value relevant. However, these practices need to be efficiently integrated into stock valuation.

Embracing corporate sustainability has emerged as a crucial strategy for companies to bolster their competitive edge and reputation. This research delves into the connection between environmental, social, and governance practices (ESG) and the cost of debt, as well as the moderating role of financial distress within this connection. By analyzing data from Saudi-listed firms between 2013 and 2021, we discovered that ESG practices have a notable negative impact on borrowing costs. This implies that organizations with increased transparency in their ESG disclosure gain access to external financial resources under more favorable terms. Additionally, we observed that the effect of ESG on the cost of debt is significantly and negatively moderated by the financial distress encountered by a firm. To bolster the credibility of these findings, dynamic generalized method of moments (GMM) models were utilized to address any potential endogeneity concerns, thereby enhancing the strength and resilience of the outcomes. The findings of this paper hold substantial value for investors, lenders, corporate management, and policymakers when considering the implementation and significance of a company’s ESG practices.