The Effects of Corporate Governance on ESG-related Information Disclosure: Evidence from Japanese Firms

Abstract

Given the voluntary nature of environmental, social, and governance (ESG)-related information disclosure in Japan, we use a sample of TOPIX firms from 2011 to 2019 to examine the relevance of internal and external corporate governance factors and ESG-related information disclosure for Japanese companies. For the internal governance factors, the results of the logistic regression analysis show that variables such as board independence and board activity significantly influence a company's ESG disclosure strategy, whereas the results of the generalized additive 2 model show that the internal governance variables are relatively less important than the external governance variables such as share ownership structure. For the external governance factors, the logistic regression results show that all the explanatory variables are significant. Although the results from the generalized additive 2 model are generally similar, non-linear relationships for institutional ownership and the Government Pension Investment Fund are also found. These empirical results suggest that the development of corporate governance frameworks such as Japan's Stewardship Code and Corporate Governance Code influences firms' ESG disclosure strategy and encourages them to disclose ESG-related information. This study provides new insights into the relationship between corporate governance and ESG-related information disclosure practices in Japanese companies.