Does It Pay Off to Disclose Sustainability Information? The Effect of ESG Disclosure on ESG Controversies in European Banks

This paper empirically investigates the relationship between specific dimensions of ESG disclosure and ESG controversies. Weanalyze an unbalanced panel sample of European banks between 2015 and 2022, implementing the GMM-SYS version of theArellano-Bond estimator for dynamic panels. The study results indicate that banks disclosing full information are more likelyto face scandals. In addition, EU membership has a positive impact on the ESG controversies. Overall, our research suggeststhat while transparency is intended to enhance accountability, it may also lead to heightened scrutiny and the exposure of morecontroversies. Our study, therefore, sheds new light on current knowledge on ESG disclosure and controversies, integrating the-oretical, practical, policy, and investor perspectives