Consequences of corporate sustainability reporting: evidence from an emerging market

2020 ◽  
Vol 62 (3) ◽  
pp. 243-265
Author(s):  
RMNC Swarnapali
Keyword(s):  
Financial Reporting ◽  
Firm Value ◽  
Stock Exchange ◽  
Emerging Market ◽  
Earnings Quality ◽  
Corporate Sustainability ◽  
Market Value ◽  
Sustainability Reporting ◽  
Content Type ◽  
Sustainability Disclosure

Purpose The purpose of this paper is to discover whether corporate sustainability disclosure has a potential impact on the market value and earnings quality of firms in an emerging market. Design/methodology/approach The data were collected from 220 companies listed in the Colombo Stock Exchange (CSE) in Sri Lanka during the period 2012-2016. Firm value proxies by Tobin’s Q, while earnings quality proxies by discretionary accruals (DAC). The study is premised on value-enhancing theory for firm value and transparent financial reporting perspective for earnings quality. Regression analyses are executed on the panel data to achieve the study objectives. Findings The results reveal a positive relationship between sustainability reporting (SR) and firm market value, accepting the value-enhancing theory while rejecting the value-destroying theory. This finding suggests that investors pay a premium in the financial markets for firms that perform in an environmentally and socially responsible manner, compared to firms that do not perform in a similar manner. In the same vein, the results reveal that sustainability disclosure and DAC are negatively and significantly associated, resulting in high-quality earnings. The result is consistent with the transparent financial reporting hypothesis, which is also in line with the managers’ integrity motivation. Originality/value This is the first study investigating the consequences of SR that is specific to the Sri Lankan context. Owing to the sparse studies on consequences of SR, this study contributes significantly to the extant literature by broadening the geographical coverage to include a developing country setting.

Factors influencing corporate sustainability disclosure practices: empirical evidence from Indian National Stock Exchange

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kishore Kumar ◽  
Ranjita Kumari ◽  
Archana Poonia ◽  
Rakesh Kumar
Keyword(s):  
Empirical Evidence ◽  
Information Disclosure ◽  
Corporate Sustainability ◽  
Sustainability Reporting ◽  
Free Cash Flow ◽  
Government Ownership ◽  
Content Type ◽  
Flow Capacity ◽  
Sustainability Disclosure ◽  
The Impact

Purpose This study aims to evaluate the nature and extent of sustainability disclosure practices of publicly listed companies in India. Further, it investigates the impact of potential determinants on the sustainability disclosure of companies. Design/methodology/approach The study analyzes data of 75 top listed nonbanking companies operating in India included in NIFTY100 Index for the years 2014-2015 to 2018-2019. In the present study, environment, social and governance disclosure dimensions were considered to evaluate the sustainability reporting performance of companies using content analysis. Panel data analysis was conducted to investigate the impact of various factors on the extent of sustainability information disclosure. Findings Results indicate that environmentally polluting industries disclose significantly higher sustainability information than non-polluting industries in India. The empirical findings suggest that determinants such as company size, age, free cash flow capacity, government ownership and global reporting initiative (GRI) usage positively related to the extent of corporate sustainability disclosure. Contrary to the expectations, financial leverage and profitability were found to be negatively related to the sustainability disclosure of companies in India. Practical implications This study provides empirical evidence for regulators, practitioners and corporate strategists to assess the progress in the sustainability reporting landscape in India. The finding implies that large and established companies can reduce legitimacy costs through higher sustainability information disclosure. Interestingly, this premise did not hold in the case of high leveraged and profitable companies. Overall findings can also help policymakers to incorporate necessary reforms to improve sustainability reporting in India. Originality/value This study is one of the first studies to investigate the nature, extent and potential determinants of corporate sustainability disclosure in India. The paper adds to the existing literature on sustainability reporting by providing empirical evidence on the relationship between sustainability reporting and potential determinants such as government ownership, size, leverage, profitability, age, free cash flow capacity, industry and GRI usage.

scholarly journals The relationship between intellectual capital information and firms’ market value: a study from an emerging economy

2019 ◽  
Vol 24 (1) ◽  
pp. 39-51
Author(s):  
A.A. Ousama ◽  
Mashael Thaar Al-Mutairi ◽  
A.H. Fatima
Keyword(s):  
Intellectual Capital ◽  
Firm Value ◽  
Stock Exchange ◽  
Market Value ◽  
Total Sample ◽  
Emerging Economy ◽  
Annual Reports ◽  
Content Type ◽  
Knowledge Based Economy ◽  
The Relationship

Purpose The purpose of this paper is to investigate the relationship between the intellectual capital (IC) information reported in the annual reports and market value of the companies listed on the Qatar Stock Exchange. Design/methodology/approach The study is based on a panel data collected from the annual reports and Bloomberg database for six years, specifically the periods 2010-2012 and 2016-2018. The total sample consists of 252 observations. The theoretical framework was developed in reference to the resource-based theory. The regression model is based on Ohlson’s model, which has been modified by including IC information. Findings The study found that there is a significant relationship between IC information and firm market value. This finding indicates that companies report their IC to help the stakeholders (e.g. shareholders, investors) to understand the real value of the company (which includes IC values). Practical implications The shift to a knowledge-based economy (KBE) has made knowledge a driver for economic growth, and it has become more important than capital, land and labour. This shift makes IC and resources vital for companies to create wealth, value and gain competitive advantage. The State of Qatar plans to transform its economy to a KBE in its “Qatar Vision 2030”. The findings of the study show that the companies have started to depend more on IC to contribute to transforming Qatar’s economy to a KBE. Originality/value This study could be considered a pioneer study to examine the association of IC disclosure and firm value in Qatar. Furthermore, prior literature has mixed findings, which justifies further investigation of IC’s effect on market value, particularly in the emerging economy of Qatar.

Do intellectual capitals matter to firm value enhancement? Evidences from Taiwan

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Yensen Ni ◽  
Yi-Rung Cheng ◽  
Paoyu Huang
Keyword(s):  
Intellectual Capital ◽  
Firm Value ◽  
Stock Exchange ◽  
Emerging Market ◽  
Customer Relationship ◽  
Strategic Decisions ◽  
Content Type ◽  
Data Resource ◽  
Customer Capital ◽  
The Impact

PurposeThe purpose of this study is to find evidence of the impact of intellectual capital on firm value, and, in turn, enhance the existing literature which lacks consensus on it. By employing some distinctive proxies for human capital, innovation capital, customer capital and process capital, this study might provide valuable information for firms to make strategic decisions.Design/methodology/approachThis study uses Tobin's Q to represent firm value and various variables to be the proxies for intellectual capitals. By utilizing firm-year observations, this study applies panel data models first, and then Petersen regression models for further investigation to enhance the robustness of the empirical results.FindingsFirm value is affected positively by the average net profit per employee as well as goodwill and intangible assets. This is because firms having employees with abundant knowledge will possess advantage for innovation, and the excellent reputation, a part of goodwill for oriental firms, would encourage people to consume and invest more.Research limitations/implicationsThe constraint of data resource is the main limitation. With the limited scales and as an emerging market of Taiwan Stock Exchange, it is not confirmed whether the results are appropriate for the developed markets. Nevertheless, firms should make efforts on developing intellectual capital and corporate governance for operating businesses with competitiveness and safety.Originality/valueSince capable employees enhance the innovation, innovation improves customer's satisfaction and good customer relationship increases the sales; this study illustrates that for expanding businesses, firms should make more efforts on developing intellectual capital.

Corporate sustainability disclosure’s importance in China: financial analysts’ perception

2019 ◽  
Vol 16 (8) ◽  
pp. 1169-1189
Author(s):  
Jhunru Zhang ◽  
Hadrian Geri Djajadikerta ◽  
Terri Trireksani
Keyword(s):  
Corporate Sustainability ◽  
Financial Analysts ◽  
Health And Safety ◽  
Sustainability Reporting ◽  
Global Reporting Initiative ◽  
Environmental Aspect ◽  
Content Type ◽  
Sustainability Disclosure ◽  
The Social ◽  
Level Of Importance

Purpose Corporate sustainability in China has become a subject of increasing international concern. Corporate sustainability disclosure (CSD) is considered a useful tool to facilitate the empowerment and acknowledgement of stakeholders in the quest for sustainability. However, the degree of cultural and political influences for being sustainably orientated can be significantly different between countries. This study aims to examine the perception of financial analysts, as CSD report users, in China about the level of importance of various indicators of corporate sustainability described in the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines. Design/methodology/approach A set of questionnaires was developed based on GRI G4 guidelines to measure the perception of financial analysts in China on the level of importance of each sustainability indicator described in the GRI G4. A five-point Likert scale was used to measure the report users’ perceptions of each of the indicators. Findings The findings of this study increase our understanding of how Chinese CSD report users perceive corporate sustainability differently from the GRI guidelines. The main results show that the environmental aspect of sustainability was seen to be important in China, followed by the social and economic aspects. Indicator-wise, “water”, “effluents and waste”, “emissions”, “compliance” and “energy” were perceived as vital in the environmental category, while “customer health and safety”, “customer privacy” and “compliance” were considered significant in the social category. Originality/value This study addresses the need for differing corporate sustainability guidelines for different nations and cultures, specifically within the Chinese context. It also contributes to the corporate sustainability literature by adding to our understanding of how financial analysts in China, as CSD report users, perceive aspects of sustainability.

Social responsibility or smoke screening: evidence from India

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nemiraja Jadiyappa ◽  
Bhavik Parikh ◽  
Namrata Saikia ◽  
Adam Usman
Keyword(s):  
Energy Consumption ◽  
Social Responsibility ◽  
Financial Reporting ◽  
Firm Value ◽  
Emerging Market ◽  
Negative Relationship ◽  
Public Image ◽  
Legitimacy Theory ◽  
Data Set ◽  
Content Type

Purpose The purpose of this study is to examine whether the choice of a firm to spend resources on corporate social responsibility (CSR) activities is associated with its actual social impacts as measured by its energy consumption and the quality of its financial reporting. Based on legitimacy theory, the authors argue firms in India use CSR expenditures as mere smoke screens to build a positive public image. Design/methodology/approach By using energy consumption per unit of sale as a measure of real environmental impact, the authors model firms' CSR investment behavior. Additionally, the authors use earnings management measures to examine whether CSR spenders engage in manipulating reported earnings, a practice socially responsible firms would not engage in. These hypotheses are tested using a panel data set of Indian firms for the period 2012–2014. Findings Consistent with legitimacy theory, the authors show firms that participate in socially undesirable activities such as heavy energy consumption and accounting manipulation are more likely to pursue CSR voluntarily. Additionally, the authors find evidence suggesting firms that voluntarily engage in CSR tend to have lower firm values. Originality/value This study examines the social and environmental concerns of firms that invest in CSR, especially in an emerging market context. The findings help understand the motivation for CSR behavior of corporate firms and may well explain the observed negative relationship between firm value and voluntary CSR spending observed in many emerging market contexts, especially in India.

scholarly journals Managerial ability, earnings quality and ISIS: evidence from Iraq

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ameneh Bazrafshan ◽  
Naser Makarem ◽  
Reza Hesarzadeh ◽  
Wafaa SalmanAbbood
Keyword(s):  
Stock Exchange ◽  
Emerging Market ◽  
Earnings Quality ◽  
Islamic State ◽  
Managerial Ability ◽  
Content Type ◽  
Earnings Response Coefficient ◽  
Earnings Response ◽  
Using Data ◽  
The Impact

PurposeThis study investigates the association between managerial ability and earnings quality in firms listed on the Iraq Stock Exchange and how the emergence of the Islamic State of Iraq and Syria (ISIS) influences the association.Design/methodology/approachThis study uses a sample of firms listed on the Iraq Stock Exchange over the period 2012–2018. Managerial ability is quantified using data envelopment analysis, and earnings quality is measured by earnings restatement, earnings persistence, accruals quality and earnings response coefficient. Panel regression analysis is used to examine the research hypotheses.FindingsThe findings indicate that managerial ability positively affects earnings quality of Iraqi firms and that ISIS weakens the relationship between managerial ability and earnings quality. These findings are robust to the alternative measures of managerial ability, as well as to various approaches used to address endogeneity including propensity-score matching and a difference-in-differences analysis.Originality/valueThis study provides insight into the impact of managerial ability on earnings quality in an under-studied emerging market. Furthermore, this study broadens the existing literature about the financial consequences of a modern terrorist group, ISIS.

Board involvement in corporate sustainability reporting: evidence from Sri Lanka

2018 ◽  
Vol 18 (6) ◽  
pp. 1042-1056 ◽  
Author(s):  
Nayana Chandani Swarnapali Rathnayaka Mudiyanselage
Keyword(s):  
Resource Dependence ◽  
Corporate Sustainability ◽  
Binary Logistic Regression ◽  
Sustainability Reporting ◽  
Resource Dependence Theory ◽  
Sri Lankan ◽  
Content Type ◽  
Sustainability Disclosure ◽  
The Board Of Directors ◽  
Asian Context

Purpose The purpose of this paper is to explore the role played by the board of directors in corporate sustainability (CS) disclosure within the Asian context in which sustainability reporting (SR) is an emerging phenomenon. Design/methodology/approach Data are collected from a sample of 100 listed Sri Lankan companies over a period of four years (2012-2016), representing practically all the business sectors. This study draws on both agency and resource dependence theories, while binary logistic regression is performed for the data analysis. Findings The results point out that firms that follow a sustainability disclosure policy have larger boards, a higher proportion of independent directors and more female directors. Contrary to certain common assumptions, firms that practice sustainability disclosure are not influenced by dual leadership, board ethnicity and board ownership. This study helps firms to understand whether their boards can influence the sustainability disclosure choice or not and further, to validate the appropriateness of the agency theory and the resource dependence theory for examining issues of this nature. Originality/value This study contributes significantly to the extant literature on this subject by broadening the geographical coverage, which has generally been limited to the West in corporate disclosure studies.

The role of audit committee attributes in corporate sustainability reporting

2019 ◽  
Vol 21 (2) ◽  
pp. 249-264 ◽  
Author(s):  
Amina Buallay ◽  
Jasim Al-Ajmi
Keyword(s):  
Audit Committee ◽  
Corporate Sustainability ◽  
Sustainability Reporting ◽  
Audit Committees ◽  
Content Type ◽  
Disclosure Requirements ◽  
Sustainability Disclosure ◽  
Financial Expertise ◽  
The Impact

Purpose The purpose of this paper is to analyze the extent to which sustainability reporting by banks in the Gulf Cooperation Council (GCC) is affected by the attributes of audit committees. Design/methodology/approach The research is positivist and quantitative, based on a cross-sectional and time series analysis of 59 banks from 2013 to 2017. A multivariate model is used to investigate the impact of selected audit committee attributes (financial expertise, size, members’ independence and meeting frequency) on sustainability reporting. The model is built on agency, legitimacy, resources and stakeholders theories. Findings In contrast to the hypothesis, the authors report a negative association between financial expertise and sustainability reporting. Members’ independence and meeting frequency play a positive role in determining the extent of disclosure. The control variables (bank size, age and auditor type) are positively associated with corporate sustainability reporting. Research limitations/implications The main limitations of this study are related to the chosen attributes of audit committee and do not consider the board’s attributes. However, the authors believe these limitations do not affect the findings. Future research that includes more attributes when they became available will offer more insights into the role of audit committees on sustainability disclosure of financial institutions. Overcoming these limitations may make the results more generalizable. Practical implications The results of this study have important implications for regulators, bank management, investors and creditors. For regulators, in the countries of the GCC and in countries like them, the findings reveal the importance of disclosure requirements. The development of disclosure requirements is likely to improve corporate sustainability reporting and reduce variations in the extent of disclosure among banks. Banks could use these results to improve their reporting to outsiders. For creditors and investors, the study improves their awareness of the importance of corporate social responsibility, corporate governance and environmental information on credit and investment decisions and encourages banks to improve their disclosures of non-financial information. Originality/value This research makes a contribution to the scarce literature on sustainability reporting by banks, especially in an environment where capital markets lack active institutional investors, where regulators play the dominant role in determining the extent of disclosure and where banks are the main source of external finance for the corporate sector.

The effect of reporting quality on stock returns of listed companies on the Tehran Stock Exchange

2018 ◽  
Vol 67 (1) ◽  
pp. 4-19 ◽  
Author(s):  
Mahdi Salehi ◽  
Masomeh Tagribi ◽  
Shayan Farhangdoust
Keyword(s):  
Stock Returns ◽  
Financial Reporting ◽  
Unit Root ◽  
Stock Exchange ◽  
Earnings Quality ◽  
Reporting Quality ◽  
Ordinary Least Squares ◽  
Institutional Setting ◽  
Content Type

Purpose The purpose of this paper is to examine the effect of earnings quality (as a proxy for financial reporting quality) of companies listed on the Tehran Stock Exchange (TSE) and the quality of their financial information disclosure on stock returns. Design/methodology/approach The authors test the hypotheses by conducting panel data analysis on a sample of 1,680 firm-year observations from companies listed on the TSE during 2009-2014. The authors also conduct the variance inflation factor and unit root tests to control for the severity of multicollinearity in their ordinary least squares regression analysis and whether the time series variables are non-stationary and possess a unit root. Findings Using Francis et al. (2005) and modified Jones (1991) models as measures for earnings quality, the results are indicative of a significant and positive relationship between firms’ earnings quality and their stock returns. However, the research findings suggest that earnings management as well as disclosure quality (DQ) is not significantly associated with firms’ stock return. Research limitations/implications Although the authors controlled for some of the factors affecting stock returns, there are still some other factors such as the operating environment, institutional setting and/or information uncertainty that could influence stock returns, and accordingly, the authors were not able to exclude their possibility and get the most robust results. Moreover, there are several models proposed in different studies for measuring earnings quality which have led to mixed results particularly without a general consensus on what a good model is, and whether earnings quality is a priced risk factor. Originality/value Taken as a whole, the paper could provide new insights into the determinants of stock returns which has rarely been considered by prior finance literature. Furthermore, the unique institutional context of the paper could contribute substantially to the literature on the relationship between financial reporting and DQ and stock returns.

scholarly journals Impact of Corporate Sustainability on Firm Value: Indonesian Context

2020 ◽  
Vol 3 (1) ◽  
pp. 102
Author(s):  
Muhammad Yusuf Shalihin ◽  
Harry Suharman ◽  
Dede Abdul Hasyir
Keyword(s):  
Firm Value ◽  
Corporate Strategy ◽  
Stock Exchange ◽  
Corporate Sustainability ◽  
Sustainability Reporting ◽  
Method Of Moment ◽  
Estimation Model ◽  
Business World ◽  
Company Value

Sustainability reports emerge as a critical problem in the business world. Companies do not merely pursue profit maximization, but must pay attention to non-financial factors to maintain long-term growth. This study aims to investigate the relationship between company sustainability and company value. This study involved a sample of companies included in the proper index listed on the capital market and included in the category of 45 of the most actively traded companies (LQ45) on the Indonesia Stock Exchange with a study period of 2015-2018. Sample selection by purposive sampling method with the final results obtained 20 sample companies that meet the sample criteria. Then the data is tested with the Generalized Method of Moment (GMM) estimation model analysis method. The results of this study indicate that corporate sustainability has a positive effect on the value of market-based companies. This research implies that companies and the Indonesian government must pay attention to increasing sustainability reporting. Because it is proven to be used as a corporate strategy in improving long term performance and maximizing company value.

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