The Quadruple Impact of Integrated ESG and CSR Sustainability Voluntary Disclosure on Financial Reporting Quality, Firm Value, Stock Value, and Tax Avoidance: Evidence from Egypt

Purpose: Traditional financial reporting is insufficient to meet stakeholders' increased demand for information. Financial reporting contains disclosures mandated by regulators, but few companies go above and beyond to provide additional information voluntarily. The primary goal of this research is to determine whether voluntary environmental, social, and governance (ESG) and corporate social responsibility (CSR) disclosure affects financial reporting quality, firm value, stock value, and tax avoidance using data from a sample of Egyptian firms listed on the EGX.
Research Methodology: Using four regression models, the four research hypotheses were examined using secondary data gathered from the financial statements of 45 Egyptian firms listed on the stock exchange from 2016 to 2022, totaling 315 firm-year observations. Non-financial firms were excluded due to their unique nature.
Findings: According to the statistical findings, there is a favorable association between the level of voluntary ESG/CSR disclosure and the quality of its financial reporting, which is reflected in the business value and share value. The findings show that enterprises' performance in social and environmental sectors is adversely connected to tax avoidance, implying that firms with socially responsible performance are less likely to avoid taxes.
As Investors and customers are becoming increasingly concerned about the environmental and social impact of the companies in which they invest or buy. ESG/CSR reporting can assist organizations in meeting these expectations and building confidence with stakeholders; as a result, ESG/CSR reporting is a vital opportunity for a company to convey its environmental, social, and governance aims in order to attract and retain new investors. According to the findings, ESG/CSR disclosure plays an important function in business, such as improving corporate transparency, building corporate image, and providing helpful information for making investment decisions. Furthermore, the findings may provide policymakers, creditors, investors, and other stakeholders with a more comprehensive view of corporate board diversity and ownership when attempting to ensure an optimal degree of ESG/CSR disclosure from listed businesses in Egypt or other emerging markets. According to the findings, improved financial reporting quality can increase a company's access to external sources of finance while also stimulating investments and improving efficiency. Organizations that implement sustainable business practices and disclose their ESG/CSR performance may be better positioned to access capital, manage risks, and attract and retain employees and customers. This can eventually lead to better economic performance.
Originality / Value: As a result, firms must consider the interests of all key stakeholders, not just the economic aspects but also the social and environmental factors. Companies' growing interest in operating their businesses with a focus on the demands of their stakeholders will drive them to reveal more in their CSR reports. More voluntary disclosures improve transparency and lessen information asymmetry. These disclosures are necessary for making more informed investment decisions. The disclosure of firm information can increase the availability of information for stakeholders, which will affect the quality of its investment decisions