Corporate Environmental, Social, and Governance (ESG) Performance and the Internal Control Environment
研究了企业ESG表现与内部控制环境强弱的关系，发现高ESG表现与更少的内部控制重大缺陷相关，支持透明报告假说。
SYNOPSIS We consider how corporate environmental, social, and governance (ESG) performance relates to the strength of the internal control environment. The transparent reporting hypothesis predicts that high ESG performance signals ethical decision making and/or strong financial performance, both of which manifest in a stronger internal control environment and, therefore, fewer material weaknesses in internal controls. We find that ESG performance is negatively related to the likelihood of general internal control weaknesses, consistent with transparent reporting. We also find that ESG performance is negatively related to company-level internal control weaknesses, which are considered relatively severe. Further, we find that ESG performance is negatively associated with specific internal control weaknesses that indicate a lack of ethical tone at the top. We find support for both ethical and performance explanations behind the transparent reporting hypothesis. Overall, our results suggest that ESG performance is positively associated with the strength of the internal control environment. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M14; M40; M42.