The Impact of Environmental, Social, and Governance Disclosure on Research and Development Investment: The Mediating Role of External Financing

Articles in Press

Document Type : Original Article

Authors

Mahdi Saghafi ¹

Maryam Sadat Tabatabaeian ²

Eisa Haddadi ³

¹ Assistant Professor, Department of Accounting, Payame Noor University.

² Assistant Professor, Department of Accounting, Payame Noor University, Tehran, Iran

³ MSc Accounting, Department of Accounting, Payame Noor University, Tehran, Iran.

10.22067/ijaaf.2026.98298.1642

Abstract

This study investigates the relationship between environmental, social, and governance (ESG) disclosure and firms’ investment in research and development (R&D), with a particular focus on the mediating role of external financing. This study employs a panel data research design using firm-level financial data. The sample comprises 152 firms listed on the Tehran Stock Exchange observed from 2015 to 2024. Firm-level financial and ESG-related data were collected from publicly available disclosures in the CODAL database. Empirical analyses were conducted using panel data techniques implemented in Stata. The results indicate that stronger ESG disclosure is associated with higher levels of R&D investment. Furthermore, external financing has a positive effect on R&D investment and partially mediates the relationship between ESG disclosure and R&D expenditure. By jointly examining the environmental, social, and governance dimensions and incorporating external financing as an explanatory mechanism, this study offers an integrated perspective on how ESG disclosure influences firms’ innovation-related investment decisions. The findings contribute to the emerging literature on ESG and corporate innovation by highlighting the financial channels through which ESG disclosure can shape long-term investment behavior.

Keywords

Environmental, Social, and Governance (ESG) Disclosure

Research and Development Investment

External Financing

Subjects

• Accounting

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