Does ESG disclosure reduce corporate risk taking? Evidence from Indian firms

Abstract

Purpose – The present study examines the impact of ESG disclosures on corporate risk-taking behavior in India, a context that remains underexplored in the existing literature. Design/methodology/approach – Using panel regression models, the study analyses 680 Indian firms from 2011 to 2022, and we assert that ESG disclosure reduces corporate risk-taking. Findings – We find a significant negative relationship between ESG disclosure and corporate risk-taking, indicating that firms with higher ESG transparency are less likely to engage in risk-taking behavior. The inverse relationship holds for both business group-affiliated and standalone firms, with a stronger effect observed in stand-alone firms. While the impact is modest in group firms, ESG remains a significant governance tool, especially in complex structures. Our instrumental variable test, using industry averages, confirms the negative relationship between ESG disclosure and risk, while Oster’s test suggests that unobserved factors do not significantly alter this relationship. The results remain robust across alternative risk measures, reinforcing the risk-mitigating role of ESG disclosures. Originality/value – By extending the analysis to both business group-affiliated and standalone firms, and by highlighting India’s unique corporate landscape, this study contributes novel empirical evidence to the limited literature on ESG disclosure and firm risk in emerging markets. © 2025 Emerald Publishing Limited