Dissertations, Theses, and Capstone Projects

Date of Degree

6-2024

Document Type

Dissertation

Degree Name

Ph.D.

Program

Business

Advisor

Paquita Davis-Friday

Committee Members

Mehmet Ozbilgin

Svenja Dube

Punit Arora

Subject Categories

Accounting | Business Administration, Management, and Operations

Keywords

compensation, corporate governance, regulation, ESG disclosure, corporate social responsibility

Abstract

The European Parliament passed the Non-Financial Reporting Directive (NFRD) with the intent to “encourage firms to identify and manage ESG risk” and “provide more transparent and relevant information …intended to empower stakeholders” (EU Directive 2014/95/EU). In my dissertation, I examine whether this change in the information environment is associated with a change in discretionary compensation as a result of decision-useful information conveyed in the mandated Environmental, Social, and Governance (ESG) disclosures. While I expected that new ESG information (Resist) would experience cross-setting changes, my results show that the impact of the mandate is more nuanced. I find herein that the results varied according to the respective countries’ disposition on the mandate and ESG overall. I found that countries that had no prior mandate experienced lower discretionary compensation weights associated with ESG metrics. Association with decreases in both long term and short-term compensation weights proved stronger for firms in countries that specifically argued in opposition to NFRD. I also find that firms in opposition countries are less likely to enact ESG compensation policies. These findings could be useful to regulators as they broaden ESG mandated information across global markets.

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