HARP Seminar, presented by Dr Stefano Cascino: "Behind the Corporate Veil: How Business Groups Arbitrage ESG Disclosure Mandates"

Abstract

We examine how ESG disclosure mandates in the headquarters country of business group parent companies affect the ESG performance of their subsidiaries. Leveraging the staggered introduction of ESG disclosure mandates across numerous countries worldwide, we demonstrate that, while improving their own ESG performance at the headquarter-country level, business group parents actively shift irresponsible ESG activities down the corporate structure. Specifically, we document that subsidiaries of parents subject to disclosure mandates experience an increase in the occurrence and frequency of ESG incidents, particularly in countries where weaker institutions make stakeholder monitoring more challenging. Moreover, we find that, in response to the introduction of ESG disclosure mandates, parent companies streamline their group structures by tightening control over more integrated subsidiaries and divesting from those that are more peripheral. Collectively, our evidence highlights the potential unintended consequences of uneven ESG disclosure regulation and underscores the importance of cross-country coordination in regulatory design.

Short Bio on Presenter: Stefano Cascino is an Associate Professor of Accounting at the London School of Economics. His primary research interests include disclosure regulation, corporate governance, and credit markets. His research has been published in leading academic journals, such as Journal of Accounting Research, The Accounting Review, Review of Accounting Studies, and Management Science, and has generated the interest of practitioners and standard setters including the Australian Accounting Standards Board (AASB), International Accounting Standards Board (IASB). His research has also been cited in several media outlets such as the Columbia Law School Blue Sky Blog, Harvard Law School Bankruptcy Roundtable, and LSE Business Review. He is the recipient of research grants from the Institute of The Institute of Chartered Accountants of Scotland (ICAS) and the European Financial Reporting Advisory Group (EFRAG). He serves as an editor for Accounting Horizon, as an associate editor for Accounting and Business Research and European Accounting Review and is a member of the editorial board of Journal of Business Finance and Accounting and Journal of International Accounting Research. He teaches financial statement analysis and equity valuation to undergraduate students and executives, financial accounting to master students, and empirical capital markets research to PhD students. For his dedication to teaching, he received the LSE Teaching Excellence Award in 2012, and the LSE Education Excellence Award in 2016, 2017, 2018, and 2023. He holds a PhD in Business Economics (Accounting) from the University of Naples Federico II and is a Certified Public Accountant and Statutory Auditor (Italy).