Environmental, Social, and Governance Disclosure and Financial Performance: Evidence From the Rail Industry

2. Literature Review, Methodology, And Data

The ESG disclosure activities of the rail companies remain mostly untouched in the relevant literature. A quick review reveals only two related studies. Özcan (2018) examines the determinants of governance disclosure of the publicly traded rail companies. His findings indicate that the board size, the representation of outside directors, financial leverage, and firm size have positive association with governance disclosure whereas rail companies established in civil law countries tend to underperform their counterparts from common law countries in term of governance disclosure. In a more in-depth study, Özcan (2020) documents that government ownership has a positive effect on the ESG disclosure scores of the publicly traded rail companies. The goal of this chapter is to contribute to the literature by filling this gap. Particularly, we intend to explore the impact of ESG disclosure performance of the publicly traded rail companies on their profitability and market valuation. Our model to test these associations is as follows: