Environmental, Social, and Governance Reporting and Firm Value: The Moderating Role of Corporate Transparency in Latin America

Abstract

This research analyzes the relationship between ESG performance and firm value in Latin America, considering the role of corporate transparency. We used a panel data structure with a sample of 330 companies observed annually from 2014 to 2024. The results demonstrate a negative relationship between ESG performance and Tobin’s Q, suggesting that stakeholders tend to interpret sustainability initiatives as short-term costs rather than strategic investments. However, this relationship changes when corporate transparency is incorporated, indicating that consistent, credible disclosure helps the market reinterpret these actions and value them positively. When ESG is broken down, the environmental and social components explain the initial negative effect, while governance is not significant. Reputation, as reflected in Big Four audits, does not change this relationship. The findings suggest that ESG influence is indirect and depends on how companies communicate it to the market. Therefore, companies must strengthen their ESG strategies with more effective transparency policies, since stakeholders require integrated non-financial information to avoid short-term biases.