ESG Reporting and Analysts’ Recommendations, and Royalty Political Connection

In this study, we investigate whether or not sell-side analysts consider or incorporate the environmental, social and governance disclosures (thereafter ESG) in their recommendations. We then test whether the possibility of a moderation effect of a royalty political connection of directors affects this relationship. Using a dataset from six Gulf Cooperation Council (GCC) countries, we find evidence that analysts value and incorporate the ESG in their analysis about the firm. However, the royal political connections have a moderating negative effect on the association between sell-side analysts' recommendations and ESG. This suggests that the sell-side analysts may assess the ESG disclosure in those firms with royal family members in the board as a superficial compliance rather than a genuine commitment. Our findings hold after we conduct numerous tests to address measurement issues