University of Illinois Urbana-Champaign

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

Lyman, Rachel Bracken

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

Description

Title
Converting the skeptic but losing the faithful: An experimental examination of expanding and auditing information in ESG reports
Author(s)
Lyman, Rachel Bracken
Issue Date
2024-04-05
Director of Research (if dissertation) or Advisor (if thesis)
Peecher, Mark
Doctoral Committee Chair(s)
Peecher, Mark
Committee Member(s)
  • Leiby, Justin
  • Mendoza, Kim
  • Hotaling, Jared
Department of Study
Accountancy
Discipline
Accountancy
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
ESG, Assurance, Single Materiality, Double Materiality, Socially Responsible Investing
Abstract
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.
Graduation Semester
2024-05
Type of Resource
Thesis
Copyright and License Information
Copyright 2024 Rachel Lyman

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