Enhancing Corporate Transparency: The Impact of Auditor Quality and Audit Committee Dynamics on ESG Disclosure

Abstract

Research aim: This study examines the relationship between audit committee (AC)
dynamics, such as size, gender diversity, and independence, auditor quality, and ESG
disclosure practices.
Design/ Methodology/ Approach: Using a weighted least squared regression method,
this study analyses 315 firm-year observations from 63 Malaysian public-listed companies
between 2018 and 2022.
Research finding: The results indicate that AC independence and gender diversity
significantly enhance ESG, social, and governance disclosures, while AC size negatively
impacts social and governance disclosures. Auditor quality showed limited influence, with
a negative effect on governance disclosure.
Theoretical contribution/Originality: This study contributes to agency and stakeholder
theories by emphasising AC attributes’ roles in mitigating information asymmetry and
addressing stakeholder interests. It challenges existing assumptions about auditor quality,
suggesting the need for ESG-specific audit frameworks, particularly in emerging markets.
Practitioner/Policy implication: For policymakers, the findings highlight the need to
strengthen governance frameworks by promoting AC independence and diversity.
Practitioners, especially audit firms, should integrate ESG expertise to support companies
effectively. Regulators may consider revising corporate governance codes to encourage
balanced ESG disclosures across all dimensions.
Research limitation: The study focuses solely on 63 Malaysian public-listed companies,
using data between 2018 and 2022.