A New Dimension of Transparency: ESG Disclosure and Its Effect on Shareholder Behavior

This study examines the impact of Environmental, Social, and Governance Disclosure (ESGD) on a company’s ownership structure in predominantly developed economies. It aims to assess whether ESGD influences the shares held by different investor types, with a focus on institutional investors. Using data from 2016 to 2022, ESGD is measured relatively and absolutely, while ownership is categorized into corporate, government, individual, and institutional types. A multivariate regression assesses the overall impact, and a univariate regression specifically examines the effect on institutional ownership. The analysis reveals a significant link between ESGD and ownership structure, suggesting that ESGD shapes ownership dynamics. In particular, institutional investors respond positively to relative ESGD, valuing how a company’s ESG transparency compares to its peers. The study acknowledges limitations like the short time frame and potential biases in the database. Nevertheless, the findings suggest that companies can attract institutional investors by improving ESG transparency, even if actual ESG outcomes are modest. This research contributes to the understanding of how ESG transparency shapes investor behavior, offering valuable insights for companies, investors, and policymakers. Keywords: corporate governance; ESG disclosure; institutional investors; ownership structure; transparency