ESG DISCLOSURE STRATEGIES OF KSE-100 FIRMS: DOES GREEN-HUSHING ENHANCE TOBIN’S Q?

Abstract

This paper discusses the impact of the green-hushing effect on the market value of the listed firms in the KSE-100 index of Pakistan. Green-hushing is the garnering of environmental sustainability practices by companies that even seem to under-report various environmental sustainability protocols and practices. As ESG reporting is set to be a global norm, firms in emerging economies and especially those companies in regions where emerging disclosure regulations are imposed are subject to striking a balance between responsibility toward the environment and control in deciding what to disclose. The article applies the signaling and agency theory to study whether selective silence concerning ESG brings any additional value to firms in terms of measurement by Tobin Q. The process utilizes panel data (2018-2022) of 86 companies (N = 430 firm-year observations) that examines ESG performance, voluntary disclosure content, and media exposure. The new index ESG Silence Index (ESI) is presented to grasp the divide between the environmental performance and reporting. Estimates indicate that ESI scores are significantly related to the increased popularity of Tobin Q (0.142, p < .01) in those industries with the poor ESG regulation and less publicity of media. This implies that since an institution has a permissive oversight, under-disclosure of matters regarding ESG can be viewed as a strategic approach by investors or efficiency. The research extends the ESG knowledge by measuring the degree of green-hushing and connecting it to market valuation in South Asia, which can be applied by managers that need to balance transparency and discretion trade-off when reporting on ESG.