Abstract
Environmental sustainability has become a significant approach for firms to enhance their competitive advantage and reputation. This study examines the association between environmental sustainability disclosures and firm value, in addition to the moderating impact of independent board directors on this association. Using data from Saudi listed firms, we find that reporting environmental sustainability practices has a positive and significant impact on firm value, suggesting that enhanced responsibility and transparency in addition to improved stakeholder trust are important in promoting firm value. We also find that the influence of the reported environmental sustainability practices on firm value is strongly and positively moderated by the presence of independent directors on firms’ boards, signifying that stakeholders relate environmental reporting by firms to more independent directors providing better accountability to environmental practices. The implications of this study will be of great importance for policymakers, firm management, academia, and investors in considering the adoption and importance of firms’ environmental practices.
Highlights
Global concerns about sustainable development and environmental issues have recently increased [1,2]
The main purpose of our study was to examine the influence of environmental sustainability disclosures on the value of Saudi listed firms and to examine the moderating impact of independent directors on this influence
The results of this study provide strong empirical evidence that environmental sustainability disclosures lead to greater firm value in the Saudi financial market
Summary
Global concerns about sustainable development and environmental issues have recently increased [1,2]. The Sustainable Stock Exchange (SSE) Initiative of the United Nations (UN) [3] indicates that by 2030, large firms are likely to disclose their influence from social and environmental practices. Environmental practices such as decreasing emissions and consuming resources are firm activities that affect firm stakeholders [4]. Alsayegh et al [8] indicated that firms have started to recognize the importance of properly considering sustainability approaches to achieve their future plans To this end, firm value maximization can be related to a firm’s reaction to its operating environment, which will motivate firms to go beyond limited and short-term financial concentrations
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