). Moderating impact of the board of directors on environmental accounting and market reactions in South Africa

Abstract

Purpose-The UN environment challenge 2030 was set to develop and enhance approaches to sustainable development. The study was carried out to investigate the impact of environmental accounting on market reactions in Africa and more so the moderating impact of the board of directors on the said relationship. Methodology- The study used 119 listed firms on the Johannesburg stock exchange with the period spanning 2008-2019. We used Investment variable regression model for the study using share price and adjusted market returns as proxy for market reactions and environment accounting as reported in annual integrated reports as a proxy for environmental accounting Findings- Results obtained show that environmental accounting has a positive and statistical relationship with market reactions and the board of directors does moderate the relationship between market reactions and environmental accounting. The study shows that firms in South Africa are taking sustainability accounting correctly by accounting for the environment. This supports the legitimacy theory and also supports the notion that firms are taking the lead in climate change consideration. We are the first to make such a study in an African setting and thus we hope that regulators will pay more attention to the reports and workings of firms and their contribution to the environment. Conclusion- The study supports stakeholder and legitimacy theories as it shows that directors carry out decisions for the benefit of all stakeholders, and firms carry out decisions to prove their legitimacy in fulfilling their societal obligations which include taking care of the environment as any responsible citizen would. In order to achieve the UN environmental goals of 2030 of a cleaner environment, we need everyone on board including firms, investors and the public. Investors can help push firms be more sustainable and take care of the environment in which they operate by refusing to buy the assets of firms engaging in pollution or purchasing assets for firms that are environmentally compliant. Keywords: Environment accounting, market reactions, board of directors, South Africa. JEL Codes: Q56, G00, G30