ESG reporting and analysts' recommendations in GCC: The Moderation role of royal family directors

A Alazzani, WN Wan-Hussin, M Jones… - Journal of Risk and …, 2021 - mdpi.com
Journal of Risk and Financial Management, 2021mdpi.com
This study examines whether financial analysts consider or incorporate the environmental,
social and governance disclosures (thereafter ESG) in their recommendations. We then test
whether royal family directors affect this relation. Using a dataset from six Gulf Cooperation
Council (GCC) countries, we find evidence that analysts' recommendations are influenced
by ESG information. Further, we find the political connection negatively moderates the
relationship between sell-side analysts' recommendations and ESG. This suggests that …
This study examines whether financial analysts consider or incorporate the environmental, social and governance disclosures (thereafter ESG) in their recommendations. We then test whether royal family directors affect this relation. Using a dataset from six Gulf Cooperation Council (GCC) countries, we find evidence that analysts’ recommendations are influenced by ESG information. Further, we find the political connection negatively moderates the relationship between sell-side analysts’ recommendations and ESG. This suggests that financial analysts may assess the ESG disclosure in those firms with the political connection of royalty, in GCC countries, as superficial compliance rather than a genuine commitment. Our results are robust when subjected to endogeneity tests.
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