Abstract
Using panel data analysis this study examined the influence of environmental disclosure in annual reports on financial performance of companies listed on the Nairobi Securities Exchange in Kenya. Environmental disclosure information was collected using quantitative content analysis for the period 2007–2015 while financial performance data was collected for the period 2008–2016, a one-year lag behind the environmental disclosure data. Control variables were firm size, industry type and leverage. Environmental disclosure was found to be statistically significantly positively related to the firms’ return on assets but not statistically significant with return on equity and Tobin’s Q. The overall results suggest that disclosing environmental activities neither improves financial performance nor deteriorates it. Keywords: Environmental disclosure; Financial performance; Developing country; Kenya; Panel data DOI: 10.7176/RJFA/11-14-07 Publication date: July 31 st 2020
Highlights
Leading companies around the world are increasingly keen on improving their business performance by acting on stakeholder concerns and measuring and reporting on both financial and non-financial information
The research hypothesis postulated that environmental disclosure has a positive and significant effect on the financial performance of companies listed on the Nairobi Securities Exchange (NSE) in Kenya
The overall objective of the study was to examine the influence of environmental disclosure on financial performance of companies listed on the NSE
Summary
Leading companies around the world are increasingly keen on improving their business performance by acting on stakeholder concerns and measuring and reporting on both financial and non-financial information. Several different arguments have been advanced as to why concern for the natural environment could enhance firm financial performance. Fourth, being environmentally proactive avoids the costs of negative reactions on the part of key stakeholders, but can improve a firm's image and enhance the loyalty of such key stakeholders as customers, employees, and government (Dechant et al, 1994; Hart, 1995; Shrivastava, 1995). By examining the effect of environmental disclosure on financial performance of companies listed on the Nairobi Securities Exchange (NSE) in Kenya this paper contributes empirical insights to the academic literature
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