Sustainability Reporting and Firms\u2019 Economic Performance: Evidence from Asia and Africa

Alicia Girón,Amirreza Kazemikhasragh,Antonella Francesca Cicchiello,Eva Panetti

doi:10.1007/s13132-020-00693-7

Abstract

Given the increasing concern for the global environmental issues and the relating need for preservation of the ecosystem, sustainability reporting has become more and more important, to both developed and developing economies, sparking the interest of the literature. This study primarily aims to investigate the factors that influence the adoption of new sustainability reporting practices and external assurance. Also, this paper examines the relationship between the reporting activity and firms’ economic performance. The paper combines data from the Global Reporting Initiative’s (GRI) Sustainability Disclosure Database and the Orbis database, from Bureau van Dijk. More specifically, the study uses two logit models and one regression model based on a sample of 366 large Asian and African companies which have addressed the SDGs in their sustainability reports published in 2017. The results reveal that operating in the manufacturing sector and having a higher percentage of women directors in the company’s management structure are positively related to the adoption of sustainability reporting and external assurance. Also, operating in the manufacturing sector leads to better firms’ economic performance. Contrarily from previous studies, the age of the company’s board of directors does not have influences on the use of sustainability reporting. This research contributes to the sustainability issues in the context of emerging markets by explaining the driving factors behind it and its linkage with firms’ performance.

Highlights

During the years, sustainability reporting has established itself as a key instrument capable of helping companies and organizations to satisfy the growing demand for transparency from customers, investors, other stakeholders, and from the society in general (Martínez et al 2016)
The study employs two logit models and one regression model based on a sample of 366 large Asian and African companies which have addressed the Sustainable development goals (SDGs) in their sustainability reports published in 2017
We examine the results of our hypotheses: economic performance, external assurance and the

Summary

Introduction

Sustainability reporting has established itself as a key instrument capable of helping companies and organizations to satisfy the growing demand for transparency from customers, investors, other stakeholders, and from the society in general (Martínez et al 2016). Companies disclose voluntary information about the economic, environmental and social impacts produced by their activities. This allows companies to reduce information asymmetries and increase transparency on their—positive or negative—sustainability performance (Nobanee and Ellili 2016). This increased transparency provides investors with the possibility to make more appropriate valuations and to better orient their investment towards companies with a more positive impact. This translates into better competitive positions (Fracarolli Nunes and Lee Park, 2017) and greater advantages on the market (Milne and Gray, 2013) for companies that, by demonstrating their social commitment, responsibility and sustainability in behaviour, manage to obtain the legitimacy and the social acceptance they need to be successful (Hahn and Kühnen 2013; Scherer et al 2013; Martínez et al 2016).

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Conclusion