The Quality of Sustainability Reports and Corporate Financial Performance: Evidence From Brazilian Listed Companies

Hong Yuh Ching,Fábio Gerab,Thiago Henrique Toste

doi:10.1177/2158244017712027

Hong Yuh Ching, Fábio Gerab + Show 1 more

Open Access

https://doi.org/10.1177/2158244017712027

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Journal: SAGE Open	Publication Date: Apr 1, 2017
Citations: 46	License type: cc-by

Affiliation: Centro Universitário da FEI

Abstract

Corporate sustainability is essential to long-term corporate success and for ensuring markets deliver value across society, and despite its importance, there is no clear consensus as to whether the financial performance of companies relates to their sustainability performance. The objectives of this study are to verify whether the sustainability reporting quality would affect corporate financial performance (CFP) among the firms listed on Corporate Sustainability Index (ISE) and to examine the quality of information disclosed in their sustainability reports (SR). The sample is composed of all firms listed on ISE for the period 2008 to 2014. This study considered accounting and market-based indicators and control variables. There is no clear consensus as to whether the financial performance of companies listed in sustainability indices relates to their sustainability performance. The main findings are as follows: There is no association between accounting and market-based variables and the reporting quality, and although the quality disclosure is improving throughout the years studied, the scores are still low. This is also true in the three dimensions of sustainability. We are not aware of studies examining the relationship between CFP and sustainability reporting quality, and this is the main contribution.

Highlights

Corporate sustainability is essential to long-term corporate success and for ensuring markets deliver value across society (United Nations Global Compact, 2014)
The scores observed in a set of 208 reports of the sample show a room to improvement as the averages in the three dimensions are around
Most of the studies researched for this article investigate the link between sustainability performance and/or practices and corporate financial performance (CFP), others examine the relation between CFP and sustainability report reviews, with the disclosure extension of Triple Bottom Line (TBL) reporting or with reports according to Global Reporting Initiatives (GRIs) guidelines

Summary

Introduction

Corporate sustainability is essential to long-term corporate success and for ensuring markets deliver value across society (United Nations Global Compact, 2014). Investors have adopted sustainability as a criterion to be considered in the configuration of their investment portfolios, which has led to the emergence of sustainability indices linked to the financial market (López, Garcia, & Rodriguez, 2007) Among these are the Dow Jones Sustainability Index in the United States, FTSE4Good in the United Kingdom, Corporate Sustainability Index (ISE) in Brazil, and the STOXX Global ESG Leaders Index in Germany. The idea underlying these indices is that sustainability practices constitute a potential element for long-term value creation from which shareholders will benefit. The element that differentiates between the firms that belong to sustainability indices and those that do not are the requirements for information disclosure on sustainability (López et al, 2007)

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