Corporate Governance, IFRS Adoption, and Environmental Transparency: A Theoretical Model of Financial Reporting Quality and Information Asymmetry

Abstract

Environmental transparency has become an important dimension of corporate accountability as investors, regulators, communities, and other stakeholders increasingly demand reliable information about firms’ environmental conduct and sustainability performance. Although corporate governance, IFRS adoption, audit committee effectiveness, and financial reporting quality have been widely examined in accounting and finance literature, their theoretical connection with environmental transparency remains insufficiently integrated. This paper develops a conceptual model explaining how corporate governance and IFRS adoption can improve environmental transparency through financial reporting quality and reduced information asymmetry. Drawing on agency theory, signaling theory, stakeholder theory, legitimacy theory, and institutional theory, the paper argues that strong governance structures reduce managerial opportunism, improve disclosure discipline, and strengthen accountability. IFRS adoption improves comparability, consistency, and credibility of reported information, while audit committee expertise and external auditor quality enhance monitoring effectiveness. These mechanisms can create a broader transparency culture that extends from financial reporting to environmental disclosure. The paper proposes financial reporting quality as a mediating mechanism between corporate governance, IFRS adoption, and environmental transparency, while information asymmetry is positioned as a barrier to credible sustainability communication. The framework further incorporates public governance, digital capability, human capital, and environmental governance as enabling institutional conditions. The paper contributes to governance, accounting, and sustainability disclosure literature by linking financial transparency with environmental accountability in one theoretical model. It also provides propositions for future empirical testing using listed firm data, ESG disclosure scores, sustainability reports, audit committee characteristics, IFRS adoption indicators, environmental performance measures, and information asymmetry proxies in emerging and developed market contexts.