Varieties of Capitalism and ESG Disclosure Quality

A Four-Country Panel Analysis of Institutional Pressures and Legitimacy-Seeking

Abstract

While companies around the world are converging to global standards on ESG reporting like GRI, TCFD and ISSB, we still do not know how different varieties of capitalism (VoC), i.e., Liberal Market Economies (LME), Coordinated Market Economies (CME), and Hybrid economies, respond to external institutional pressures to disclose this information. The study integrates Institutional Theory, VoC Theory, and Legitimacy Theory to examine the quality of ESG disclosures by 200 companies across the USA, UK, Japan, and India from 2020 to 2023. A detailed panel regression analysis revealed that UK firms (LME) achieve the highest disclosure quality (37.44), significantly exceeding India (29.32, p<0.001), while USA (29.05) and Japan (31.98) show intermediate levels. The study also finds that India’s BRSR mandate (2022) produced the largest improvement (+7.75 points, p=0.0013), confirming that coercive pressure has the strongest effect in Hybrid economies. However, in LME countries, voluntary standards are more effective. Further, 65% of LME companies make substantive disclosures, compared with 28% of Hybrid companies. In India, 42% of companies exhibit symbolic disclosure patterns. Cross-country convergence is occurring: India showed the largest improvement (+10.4 points, 2020-2023), narrowing but not eliminating the gap with developed economies. The study contributes in three ways: (i) it empirically tests the VoC theory in the context of ESG disclosure, (ii) establishes India as an "emerging hybrid" ESG disclosure type, and (iii) companies' responses across economies vary to pressures to disclose ESG information. The findings suggest that standard-setters should not impose a one-size-fits-all approach; instead, they should develop context-specific enforcement mechanisms, especially for emerging markets.