ESG Disclosure: The Extent of Investors’ Confidence In Stock Market

Abstract

Sustainability development information in stock market that consists of Environmental, Social and Governance (ESG) disclosure signal as a relevant information to increase investors’ confidence prior for investment decision. However, the accuracy of ESG disclosure information’s ability to maximize shareholders wealth. Even though Malaysian stock market has seen an increasing number of Public Listed Firm (PLF) that presents ESG information, the extent of ESG disclosure’s relevance for investor to include in their investment decision remains questionable. Sustainability development framework that has been practicing is believed to be able to attract investors to access and evaluate firms’ ability to maximize investors wealth.  In contrast, the component of signalling theory that explain greater information provides firstly, higher cost and time-consuming factors and secondly the observable information may avoid fabricate positive signal does not seen in the context of ESG disclosure. Using event methodology and PLFs from Malaysian stocks market as sample, evidence showed that greater ESG disclosure increases investors uncertainty about the true value of firms in the market. The incentive of high-quality firms presenting their favourable ESG information to the market is able to signal high firm value in the market does not see in Malaysian stock market.