Can stakeholders evaluate corporate ESG performance through its ESG disclosure? A study of Thai listed firms

Abstract

This study investigates whether Environmental, Social, and Governance (ESG) disclosure can be a predictor of ESG performance among Thai firms listed on the Stock Exchange of Thailand. Employing a multidimensional approach, the research scrutinizes the relationship between ESG disclosure and performance, distinguishing between hard and soft disclosure forms. Utilizing Partial Least Squares Structural Equation Modeling (PLS-SEM) for data analysis and employing a multiple regression approach for robustness testing, the study draws on a sample of 241 observations from 67 firms spanning the period 2016–2019. The findings indicate that the measurement models of ESG performance are statistically significant. However, both hard and soft ESG disclosures were found to be insignificantly associated with ESG performance overall. Further examination reveals statistically significant associations between ESG disclosure and individual dimensions of ESG performance. Specifically, environmental and social hard disclosures demonstrate significant relationships with environmental and social performance, whereas governance hard disclosure and all dimensions of ESG soft disclosure exhibit no such association with performance. These results suggest that while hard disclosure of environmental and social activities by Thai listed firms tends to reflect their actual performance, soft disclosure across ESG dimensions may lack reliability. Stakeholders are advised to exercise caution when interpreting a firm’s ESG report. Additionally, Thai regulators are encouraged to prioritize ESG hard disclosure, given its apparent reliability and credibility.