Financial Slack And ESG Disclosure: Why Profitability Drives Transparency Differently In Asean And BRICS Markets

• Joshua Benson Nadiyasu

  Adamawa State University, Faulty of Administration and Management Sciences, Department of Accounting and Finance

  Author

An independent board doesn't guarantee ESG disclosure if the firm can't afford it. That's the central premise of this paper: firm profitability may be the missing link between governance improvements and actual ESG reporting. We test whether financial slack (profit) mediates the relationship between corporate governance and ESG disclosure across ASEAN and BRICS developing economies (280 firms, 2012–2019). The answer differs by region. In ASEAN, profitability appears to unlock governance effects: political connections reduce profitability, which reduces ESG (strong indirect effect). Board independence increases profitability, which increases ESG (57% mediation). In BRICS, governance and profitability work in parallel, not sequentially board independence directly increases ESG independent of profitability gains. Overall, slack resources theory holds in both regions but operates differently: ASEAN firms need profitability before ESG makes sense to stakeholders; BRICS firms adopt ESG for reasons beyond profitability (government expectations, institutional investor pressure).

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