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This study analyzed the impact of sustainability reporting on firms’ growth as a result of adopting an environmentally and socially responsible behavior. The information published by companies listed on the main section of the Bucharest Stock Exchange during a period spanning six financial years (2012–2017) was used to assess the influence exerted by the conduct of activities related to sustainability; the integrated reporting of economic, social and environmental protection information; and the quality of published reports on certain indicators relevant to appreciating a firm’s growth (price-to-book ratio, sales growth and cost of capital). The results obtained indicate a low influence of sustainable reporting on a firm’s growth indicators. Current and potential investors, lenders and business partners interpret sustainability reporting as insufficiently documented and as having a low capacity for integration within the decision-making process. However, significant dependency relationships were identified, and particularized on various connections without following a correlation pattern between a firm’s growth directions and the indicators of sustainability reporting. The results remain robust even after the introduction of certain control variables, such as sustainability sensitive industry sectors, company size and age, or increase of investments. Our paper sets out to contribute to expanding the specialty literature by highlighting the involvement of sustainable reporting as a factor in optimizing firms’ growth strategies and, at a methodological level, by using a quantile regression.
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Is Sustainability Reporting a Business Strategy for
Firm’s Growth? Empirical Study on the Romanian
Capital Market
Mihai Carp * , Leontina Păvăloaia, Mihai-Bogdan Afrăsinei and Iuliana Eugenia Georgescu
Department of Accounting, Business Information Systems and Statistics, Faculty of Economics and Business
Administration, Alexandru Ioan Cuza University of Iasi, 700506 Iasi, Romania; (L.P.); (M.-B.A.); (I.E.G.)
Received: 29 December 2018; Accepted: 24 January 2019; Published: 27 January 2019
This study analyzed the impact of sustainability reporting on firms’ growth as a result
of adopting an environmentally and socially responsible behavior. The information published by
companies listed on the main section of the Bucharest Stock Exchange during a period spanning
six financial years (2012–2017) was used to assess the influence exerted by the conduct of activities
related to sustainability; the integrated reporting of economic, social and environmental protection
information; and the quality of published reports on certain indicators relevant to appreciating a
firm’s growth (price-to-book ratio, sales growth and cost of capital). The results obtained indicate a
low influence of sustainable reporting on a firm’s growth indicators. Current and potential investors,
lenders and business partners interpret sustainability reporting as insufficiently documented and as
having a low capacity for integration within the decision-making process. However, significant
dependency relationships were identified, and particularized on various connections without
following a correlation pattern between a firm’s growth directions and the indicators of sustainability
reporting. The results remain robust even after the introduction of certain control variables, such as
sustainability sensitive industry sectors, company size and age, or increase of investments. Our paper
sets out to contribute to expanding the specialty literature by highlighting the involvement of
sustainable reporting as a factor in optimizing firms’ growth strategies and, at a methodological level,
by using a quantile regression.
sustainability reporting; firms’ growth; business strategies; Romanian capital market;
quantile regression
1. Introduction
The concept of “sustainable development” started being used at a large scale after being presented
in the Brundland report, “Our Common Future” [
]. “Sustainable development seeks to meet
the needs and aspirations of the present without compromising the ability to meet those of the
future” [
]. Reporting information regarding sustainable development became a means by which
major companies could show their concern for increasing the transparency of the activities they
conduct and for promoting corporate responsibility [
]. As part of a social contract promoted by
legitimacy theory [57], companies respond to society pressures using sustainable reporting as a tool
for confirming the socially responsible behavior mandated by the external environment in which
they conduct their activity [
]. In accordance with the voluntary disclosure theory, companies also
perceive the instrumental role of presenting social responsibility information in increasing economic
performances [
] and submit such data to improve their image and reduce the negative effect
Sustainability 2019,11, 658; doi:10.3390/su11030658
Sustainability 2019,11, 658 2 of 21
of their own activities. Concurrently, the voluntary presentation of financial information, as well
as environmental protection and social responsibility information in single report has become the
new trend in terms of corporate reporting [
]. The responsible behavior of companies is not equally
appreciated in all economic areas. The effects of sustainable porting on company performances depend
on both the manner in which they present the activities they undertook and on a plethora of factors
that are specific of the society and business environment in which they operate.
Sustainable reporting is an extensively debated subject in the specialty literature, with studies
focusing on two primary research directions. On the one hand, the analysis focuses on the determinant
factors of sustainable reporting, such as corporate governance [
], profitability, ownership
structure, company size [
], debt and liquidity [
] or even board gender [
]. On the other
hand, research focuses on the effect of reporting sustainable actions on the indicators of economic
results, namely company value [2325], cost of capital [2628] or operating performances [13,29,30].
This study analyzed the impact of sustainability reporting on firms’ growth. The contribution
of sustainable reporting to firms’ growth was analyzed in terms of both the role of social and
environmental protection actions that are published (the existence of sustainable reporting and the
integrated reporting of information), as well as in terms of the means via which same are made
disseminated (the quality of sustainable reporting). The resulting dimension, firm’s growth, was
disaggregated into three study directions, namely: the prospect for increased market value (measured
via the price-to-book ratio (PBR)), operational performance (as reflected by the sales’ growth) and cost
of capital (estimated via the weighted average cost of capital (WACC)).
The results thus obtained reveal a low influence of sustainable reporting on the firms’ growth
indicators. In the Romanian context, social and environmental protection actions do not generate
significant reactions on the financial (stock exchange or banking) or real (goods and services’) market,
the results being in line with those stated by Guidry and Patten [
]. Existing and prospective investors,
lenders and business partners believe that sustainability reports are insufficiently documented and
have a low capacity to become integrated in the decision-making process, these statements also
being supported by Stacchezzini et al. [
] and Leszczynska [
]. However, significant dependency
relationships were identified and particularized on various connections without following a correlation
pattern between a firm’s growth directions and the indicators of sustainability reporting. In this respect,
involvement in sustainable actions and integrated reporting determine an increase in the cost of capital,
similar to the findings of Clarkson et al. [
], and a decrease in the prospects of growth for firms’ value,
consistent with the results of Lourenço and Branco [34].
This paper debates the role of sustainable reporting in optimizing the strategies adopted for
growing a firm, thus filling a gap in terms of estimating the factors that contribute to business
development. This article is different in terms of the mode of measurement for sustainable reporting
(via the proposed variables), being developed in an economic area where imparting data on sustainable
activities is voluntary. Moreover, breaking down company growth into three indicators that reflect the
primary means of generating performance for companies, namely investors, business partners and
lenders, is proposed as a relatively original approach. Our paper also contributes to the expansion of
specialty literature by using a quantile regression for the purpose of increasing the thoroughness of the
analyses that were conducted.
The rest of the paper is organized into four sections, namely a synthetic literature review on
sustainable reporting and the quality thereof, as well as substantiating the working hypotheses
(Section 2); the presentation of data, variables and research methods that were used (Section 3); and
the interpretation of the results (Section 4). Finally, Section 5synthesizes the main conclusions, while
also presenting the limitations and future research directions.
2. Literature Review and Developing the Hypotheses
Environmental protection and social actions made public via sustainable reporting reflect the
entities’ effort for sustainable development. This environmentally and socially responsible behavior
Sustainability 2019,11, 658 3 of 21
can generate economic benefits for companies, substantiated in the form of increased and streamlined
activities of such companies. Companies increasingly face growing pressures to publish social and
environmental data for the sake of informing users. As such, the number of companies that voluntarily
publish such information has grown substantially: in 2017, 93% of Fortune Global 250 companies
published such reports compared to 35% in 1999, while 75% of National 100 companies did the same
in 2017 compared to 12% in 1993 [35]. The systematic integration of economic information and social
and environmental responsibility data is essential for a better adoption of decisions.
2.1. Sustainability Reporting and the Quality Thereof
Unlike financial reporting, sustainability reporting is voluntary in the majority of states [
For this reason, most companies presenting information about social and environmental protection
actions use voluntary reporting systems, such as the guidelines in the Global Reporting Initiative (GRI),
the GreenhouseGas (GHG) Protocol developed by the World Resource Institute [37,38] and, in recent
years, the integrated reporting developed by the International Integrated Reporting Council. Although
efforts were made toward standardizing the information regarding sustainable reporting (GRI and
GHG), there are still differences in the content and quality of reports compiled [
]. While other
forms of voluntary standards (ISO) managed to solve this variability in terms of implementation [
this aspect has not been solved in the field of sustainability reporting.
The lack of compulsoriness and standardization in this field leads to inconsistencies in the
companies’ assessment and reporting of sustainability reporting [
]; this vulnerability is also
generated by the fact that, unlike financial statements, no certification is required for these reports [
In fact, the voluntary publication of sustainability information can help soften the negative effects
generated by complex financial statements [
]. Stock exchange listing is a driving factor for the
increasing quality of sustainability reporting, as companies have to comply with such requirements
formalized in listing agreements. Moreover, even the listing category carries a certain influence,
and listed firms on a main category tend to report more information [13].
Given that the voluntary publishing of information regarding sustainable development is the
most frequently encouraged, the literature shows that firms tend to report good news and avoid
publishing bad news [
] to improve their image [
]. This behavior corresponds to the impression
management theory, which determines that companies use strategies for improving the positive aspects
of performance in terms of sustainability and omit negative aspects [4648].
Companies with low environmental performances avoid publishing information owing to the high
risk of litigation, which can negatively impact future benefit flows. Frequent legislative modifications
in the field of environmental protection is yet another factor that can influence the manner in which
performance in this field is estimated and reported [
]. In addition, a major part goes to the size
and business sector of the company. Thus, firms operating in business sectors with environmental
impacts tend to present general information that is difficult to check [51].
Improving environmental performances generates real economic benefits [
], but they
also have a negative impact owing to future costs [
]. On the other hand, the quality of published
reports expressed in terms of the level of detail regarding environmental protection actions provides
access to more favorable financing conditions [
]. In fact, companies that publish high-quality
environmental information show effective corporate governance and face fewer difficulties in accessing
capital markets [26].
Social responsibility practices influence the growth and streamlining of companies, in terms of
both operational performance (by increasing sales) and increased market value, as well as by reducing
the risk of litigation resolution. The voluntary publishing of social responsibility activities can also
lead to a decrease in the cost of capital of a firm [
]. On the one hand, social responsibility
actions can be a marketing strategy for firms [
]; on the other hand, they can also be a good
means for “washing away their sins”, as firms have the chance to present their image in a favorable
manner [
] and contribute via their involvement in the social progress to the economic growth
Sustainability 2019,11, 658 4 of 21
of the space where they conduct their business [
]. Actions are validated by the legitimacy theory,
which interprets socially responsible behavior as a means for companies to respond to requests issued
by the society [5,66].
Although evident, the benefits of sustainable reporting cannot be accurately estimated and
interpreted without a common measuring and reporting framework that—similar to financial
reporting—can allow for a better substantiation of the users’ decision.
2.2. Integrated Reporting in Romania
In Romania, reporting matters regarding environmental impacts were introduced via
multinational companies in the early 2000s. These companies initially published information regarding
actions undertaken for environmental protection purposes or for social cases; subsequently, they
started to present more detailed financial and non-financial information function of the requests from
their parent-company. Nationwide reports were thus published or centralized at a group level. In some
cases, the reporting was disrupted by financial problems. Few companies nationwide have reported
information on their sustainable activity without any disruptions [67].
Considering the underlying costs of presenting such information and the lack of regulations
mandating the compulsory publishing thereof, in the case of Romania-based companies, such
information continues to be presented in a rather inconsistent manner, either on the firms’ websites,
or in separate reports. In terms of the contents of the reports, the latter focus on sustainable growth
policies, certifications under ISO 14001 and ISO 18001, holding a basic or integrated environmental
permit, and presenting various social actions, respectively.
Studies conducted on the involvement of Romanian companies in social and environmental
protection activities reveal a decrease in corporate social responsibility (CSR) actions [
]. Although
the topic of sustainable growth peaks the interest of the economic medium, the transparency level of
Romanian companies is still low [
]. The studies conducted by the specialty literature also reached
the same conclusion: the majority of environmental information provided by firms in Romania is
incomplete and irrelevant [
] and fails to identify a significant connection between financial and
environmental performance [
], the tendency being to publish solely positive aspects that could
constitute a competitive advantage or a means to improve the company’s image [74].
The adoption of the 95/2014 Directive binds all companies with 500-plus employees to attach
a non-financial statement to their financial reports, such statement also providing details about the
impact generated on the environment, on clients and on employees. Many investors envision the
reporting of non-financial data as leading to transparency, ensuring a clearer vision on a company’s
sustainability performances. This also helps companies identify their vulnerabilities, which they can
remedy and thus reach their sustainable growth targets. Another advantage could be the creation of
a competitive marketplace, the access to resources and relationships between users based on trust,
on community information. Being compulsory, the regulation will boost firms to rethink their business
by also taking into consideration the principles of sustainable development.
2.3. Substantiation of Hypotheses
The literature developed by studying sustainable reporting focuses on two primary directions,
namely identification of determinant factor for social and environmental protection actions, and the
role of such activities in a firm’s development, respectively. Our paper focuses on analyzing the
influence of sustainable reporting on a firm’s growth indicators.
Publishing sustainability information can be seen as positive news and can therefore improve
the firm’s reputation (with positive effects of performance) and can help avoid a decrease in share
price [
]. To this end, certain studies [
] identify a positive relationship between sustainability and
financial performance of the firm (measured via return on invested capital, return on equity, return on
assets and earnings per share or cash flow). The results show that, although a proactive environmental
strategy can be associated with future economic performance, not all firms adopt such a strategy.
Sustainability 2019,11, 658 5 of 21
However, other papers [
] identify that a firm’s profitability has a statistically significant negative
relationship with disclosing information regarding sustainable reporting. These results are justified
by the fact that firms with high levels of profitability do not depend on foreign resources to attract
capital, but can finance their activity using own resources, and thus they are more preoccupied with
economic aspects than contributing to a better society and protecting the environment [
]. From
yet another perspective, however, a high level of profitability can raise public suspicions, in which
case the situation could be clarified by providing non-financial information [13].
Starting from the main objective of our research, i.e. determining the impact of sustainable
reporting on firms’ growth, we considered the following hypotheses:
Hypothesis 1 (H1).
There is a significant association between sustainable reporting and operational
performance, estimated via sales growth.
Conducting a sustainable activity allows companies to reduce their costs of capital by inducing
investors to believe that the risk associated with their investment is lower [
]. To this end,
Dhaliwal [
] provided evidence that the information published by firms with superior CSR
performances generate a subsequent reduction in their costs of capital. A negative association between
disclosing social aspects and own cost of capital was identified in countries with lower investor
protection, in firms with high levels of financial opacity [
]. In addition, given that financial opacity
increases own costs of capital, there is a possible substitution connection between financial and
non-financial information [
]. From another point of view, improving responsible relations with
employees, environmental policies and product strategies substantially contribute toward reducing
companies’ costs of capital [
]. Barth et al. [
] analyzed annual reports of listed companies from
South Africa, where integrated reporting is mandatory, and they identified a positive association
between this and the companies’ liquidity and cash flows, but they did not identify any connection
between sustainable reporting and cost of capital. Qiu et al. [
] showed that social performance is
more significant for investors on the United Kingdom market. However, the study does not present
clear evidence that the information regarding environmental or social activities are associated with
future financial performances or with costs of equity.
Hypothesis 2 (H2). Sustainable reporting significantly influences costs of capital.
Voluntarily publishing information about the environment tends to influence investor perceptions
in a favorable manner, reducing uncertainty and thus contributing to increasing financial value [
Environmental information is relevant for value. This would reduce future compliance costs and
would positively influence companies’ future financial perspectives and the value of firms [
Yu and Zhao [
] stated that there are two theories for the impact of sustainability on the value of a firm:
the theory regarding the creation of value (by reducing risks owing to the integration of sustainable
reporting into the business strategies) and the theory of value erosion (sustainable activities diminish
investors’ revenues). The relationship between the quality of voluntary environmental information
on the one hand and the value of firms and costs of capital on the other hand was also analyzed
by Plumlee et al. [
]. Results show a positive association between the quality of environmental
information and the value of firms, and a mixed situation regarding cost of capital, with both positive
and negative connections, function of the type and nature of such published information. Company
characteristics—such as size, profitability and capital expenditure—associate positively with the quality
of environmental information [
]. Cormier and Magnan [
] believed that reliable and relevant
environmental information, as well as the entities’ reputation, entail certain economic benefits for
firms, including higher share prices. Considering that publishing sustainable information engenders
costs, Qiu et al. [
] analyzed the connection between presenting non-financial (environmental and
social) information, and the companies’ profitability and market value, respectively. Results show
Sustainability 2019,11, 658 6 of 21
that firms with greater economic resources publish more detailed environmental information, which
provides them with net positive economic benefits.
Hypothesis 3 (H3).
There is a significant association between sustainable reporting and the prospect of growing
the value of companies.
A significant portion of studies in the literature focus on analyzing the connection between
the disclosure of sustainable reporting information and company size [
]. Company size is
a determinant factor of sustainable reporting, as large companies and companies with high mass
media visibility are somewhat forced to report non-financial information that would lead to increased
transparency [
]. Sustainability reporting is basically the firms’ attempt to counterattack mass media
exposure using their own stories [
]. Using a sample comprised of the 50 largest firms in the USA
and Japan (100 in total), Ho and Taylor [
] determined that the reporting/disclosure ratio is higher in
larger firms, as well as in firms with lower profitability and liquidity levels. The conclusions reached by
Brammer and Pavelin [
] are consistent with the results of this study, namely that large firms tend to
have a positive association with the voluntary decision to disclose environmental information, as well
as with the quality thereof. This situation can be explained as large firms are much more visible and
are subject to more significant shareholder pressure and control [
]. Large companies also enjoy less
burdensome costs of disclosure compared to small firms, which makes them less likely to undertake
efforts in this respect [82].
3. Materials and Methods
In testing the working hypotheses, this study assessed the effect of sustainable reporting on firms’
growth via the impact generated on the behavior of the three primary financial and non-financial
user categories, namely investors, funding entities and clients. To this end, publishing environmental
protection and social actions is a quality indicator for the organizational culture of entities, which can
help reap certain benefits substantiated in the form of increased and streamlined activities thereof.
3.1. Sample, Data and Variables
The analyzed population comprised Romanian companies listed on the main section of the
Bucharest Stock Exchange (BSE), excluding companies whose scope of business is financial brokerage.
The financial and non-financial data were collected manually from various reports published on
the companies’ and BSE’s websites. Annual financial statements, annual management reports
(presenting extensive financial and non-financial information about the company) and separate pieces
of information presented on the companies’ websites have been used to this end. Owing to the
voluntary character of sustainable reporting, it was impossible to use specific reports. Only four
reports of this kind were identified. We synthesized information that was specific to the 59 companies
remaining in the sample, over the course of six financial years (2012–2017), thus producing 352
observations on each variable involved in the analysis. Extreme values of outliers were replaced, as per
a methodology proposed by Hoaglin and Iglewicz [83], by the closest values in the distribution.
The variables substantiated based on the collected information are concentrated in Table 1,
function of their role in the conducted analysis. The resulting dimension, i.e. the growth of a firm,
was broken down into three study directions: the prospect for increased market value, operational
performance and the level of cost of capital. Representative indicators were used for each of
these directions.
Sustainability 2019,11, 658 7 of 21
Table 1. Description of variables used in the study.
Variable Abbreviation Description
Dependent variables
Price to book ratio PBR Provides the ratio between share price and its book value
Sales growth SalesGr (salesi,tsalesi,t1)/salesi,t1
Cost of capital WACC Weighted average cost function of the structure of financial
Independent variables
Sustainable reporting SustRep Dummy variable, takes the value 1 if the entity publishes
sustainable information and 0 if it does not
Integrated reporting IntegRep
Dummy variable, takes the value 1 if the entity produces integrated
reports and 0 if it does not
Quality of report QualRep
The dummy variable takes the value 1 if the entity presents both
descriptive and quantitative information, and the value 0 if it only
presents descriptive (qualitative) information.
Control variables
Firm size Size Log total assets
Investment growth InvGr (tangible assetsi,ttangible assetsi,t1)/tangible assetsi,t1
Work productivity W Log (sales/No. of employees)
Industry SensInd Dummy variable, takes the value 1 if the scope of activity is
sensitive to sustainable activities and 0 if it is not
Age of the company Age Number of years of listing
The opportunities for increasing the value were measured via the price-to-book ratio [
], as the
indicator shows the level of informational asymmetry between the company and investors [
its reduction entailing the need for sustainable reporting [
]. An additional report to investors
comprising non-financial information on sustainable actions could lead to an increase in the demand
for listed shares, which then determines an increase in the market price thereof and improved financial
performance. Operational performance was estimated via sales’ growth, calculated as change in sales
scaled by lagged sales [26], because this is a stable indicator and it is less affected by seasonality [85].
Cost of capital is influenced by the perception of the risk associated to financing a company [
Integrated reporting helps investors understand the risk the entity is exposed to and how the business
model responds to it [
]; streamlining the activity helps diminish the cost of external financing [
Minimizing capital cost ensures the assessment of a high company value [
], ergo its determinant
role in company growth.
Sustainable reporting was assessed via three quality indicators. As such, following the dummy
variable coding procedures used by Kuzey and Uyar [
] and Frias-Aceituno et al. [
], we defined
the Sustainable Reporting (SustRep) variable, under which involvement in any kind of sustainable
reporting (including the publishing of certain information on the companies’ own websites or singular
mentions in annual reports) scored 1, while the lack of any information in this respect scored 0.
The information identified most frequently comprised actions regarding: air emissions, the treatment
of waste and wastewater, energy consumption, greenhouse gas certificates, occupational safety, equal
opportunity, etc.
The Integrated Reporting (IntegRep) dummy variable was created by awarding a score of 1
for cases where companies produced integrated reporting for the conduct of a sustainable activity,
as proved by obtaining both the ISO14001 and ISO18001 permits, which attest to the performance
of concrete actions for environmental protection and for social purposes. The information in this
Sustainability 2019,11, 658 8 of 21
regard was presented in the annual report that completes the set of financial statements. A lack of such
reporting ascribed a 0 score to the variable.
The quality of sustainable reporting was determined via the Quality of Reporting (QualRep)
variable, following the technique applied by Stacchezzini et al. [
], taking the value 1 if the company
published descriptive information (in a narrative form) along with quantitative data, and the value 0 if
reports only comprised descriptions (without figures). Narrative information includes merely simple
notes, succinct reviews or even just lists of the sustainable actions that were conducted. The quantitative
data include both numerical information about certain indicators such as water savings or amounts
invested in social actions, and evolution graphs of the calculated indicators.
Control variables such as size, age and sustainability sensitive industry sectors were introduced
in line with the relevant literature in the field regarding sustainable reporting [
]. Company
size influences the capacity to enter commercial and financial markets [
], as well as the risk level as
perceived by investors, with effect on cost of capital [
]. According to Bachoo et al. [
] and Shamil
et al. [
], business sectors were grouped within a dichotomous variable function of their sensitivity to
sustainable activities. To this end, the SensInd variable took the value 1 for sensitive sectors (e.g., energy,
processing industry, and constructions) and 0 for non-sensitive sectors (e.g., services, commerce, and
information technology). The age of the company was deemed a determinant factor in sustainable
reporting, as old companies tend to improve their practices in terms of environmentally and socially
responsible activities [
]. The investment growth (InvGr) and work productivity (W) variables were
introduced in the study owing to their capacity to reflect the implementation of sustainable actions,
namely adjusting technologies to environmental protection requirements and increasing the efficient
use of personnel following activities of a social nature.
3.2. Data Analysis Methods
The study on the influence of sustainable reporting on firms’ growth employed correlation
analysis and multiple linear regression analysis with alternative independent variables. The general
econometric model is illustrated in Equation (1).
Firm_Growthi,t =α0+α1*Sustainabilityi,t +αj*Controlsi,t +εi,t (1)
where Firm_Growth is broken down in three dependent variables, specific of the three directions for
measuring growth, namely PBR (price-to-book ratio) for the prospect of increase value of firm i, at
time t;SalesGr (sales growth) for change in the sales of firm i, at time t; and WACC (weighted average
cost of capital) of firm i, at time t, the calculation of which used ROE (return on equity) for cost of
equity and effective interest rate for cost of debts. The Sustainability independent variable shows the
individual influence of the dummy variables proposed to reflect the sustainable reporting process of
firm i, at time t, respectively, SustRep,IntegRep and QualRep.Controls integrate the conjugated action of
control variables for the variance of investments (InvGr), work productivity (W), industry (SensInd),
firm size (Size) and age (Age).
. . .
are the parameters associated with the variables in the model,
which are to be estimated, while εi,t is the error term synthesizing the influence of all the factors with
impact on the firms’ growth, but which are not included in the model.
The econometric model synthesized in Equation (2) was used to estimate the joint influence of
sustainable reporting and industry sector sensitivity as per Bachoo et al. [89].
Firm_Growthi,t =α0+α1*Sustainabilityi,t +α2*Sustainabilityi,t *SensIndi,t +
αj*Controls_lessi,t +εi,t
where Control_less comprises all the mentioned control variables, except for SensInd, and the
Sustainability *SensInd relationhip reflects the extent to which firms’ growth is influenced when
firms report sustainable activities and pertains to a sector that is sensitive to such actions (e.g., energy,
Sustainability 2019,11, 658 9 of 21
Quantile regression was used to enhance the accuracy of the results, as it facilitates the analysis of
independent factors on firms’ growth, broken down into specific growth intervals. Initially proposed
by Koenker and Bassett [
], the quantile regression model can be expressed according to the relations
of [92]:
yi,t =x’i,t β0+εi,t (3)
Quantθ(yi,t |xi,t) = x’i,t β0(4)
where y
is the firms’ growth, x
is a vector of the independent variables,
expresses a vector of the
parameters to be estimated, and
is the error variable. Quant
) shows the
th quantile of y
function of xit.
To eliminate restrictions related to endogeneity, as per Sial et al. [
], we used one year lagged
dimensions for firms’ growth so that they may integrate the effects of sustainable reporting undertaken
in the previous year.
4. Results and Discussion
The study results entail presenting the general conditions of the economic environment, in the
form of a descriptive analysis of used variables and the relations between same, followed by
conclusions reached in the process of testing the stated working hypotheses.
4.1. Descriptive Statistics
Table 2shows the measurements describing the distribution of values associated with the main
variables included in the study, useful elements in describing the economic context in which the
analyzed phenomenon is manifesting. The endeavor is conducted globally, both throughout the entire
sample and by breaking it down into two clusters, function of the use of sustainable reporting as a
means of communicating with the external medium.
Table 2. Descriptive statistics of the analyzed variables.
Elements Total Sample
N = 352
N = 206
N = 146
Mean Std. dev. Median Mean Std. dev. Median Mean Std. dev. Median
SalesGr 0.012 0.179 0.019 0.023 0.173 0.029
0.186 0.000
PBR 0.591 0.582 0.520 0.605 0.586 0.557 0.572 0.579 0.456
WACC 0.045 0.091 0.025 0.059 0.098 0.046 0.025 0.076 0.003
InvGr 0.013 0.129 0.008 0.001 0.013 0.123 0.030 0.134 0.000
Size 8.241 0.608 8.179 8.401 0.579 8.354 8.017 0.579 8.010
W5.365 0.442 5.328 5.408 0.407 5.339 5.304 0.482 5.264
Age 15.94 3.815 17.00 15.78 4.173 17.00 16.18 3.241 17.00
Source: own processing.
We note a higher average dimension of operational performance in companies that report
sustainable activities (SalesGr
=0.023) compared to companies that do not conduct such actions
and that even register a decrease in sales (SalesGr
0.002). This can show the positive impact
of environmental protection actions and social actions on commercial relationships, as an effect of
improving the company’s image.
In addition, funding entities (whether they are shareholders or lenders) interpret the lack of
sustainable reporting elements in an unfavorable light, by increasing the cost-related requirements
corresponding to the financial resources made available to the firms (WACC
=0.059 >
=0.025). From the perspective of the stock market, PBR values reflect the existence
of a significant informational asymmetry (PBR
=0.591) and the possibilities to increase the
market value of the entities, the current value of listed shares being evidently underquoted compared
Sustainability 2019,11, 658 10 of 21
to their book value. Sustainable reporting is not a significant disjunctive factor within the two clusters
that were formed, which indicates that social and environmental performance is not a determinant
element in establishing the price of shares.
The values of control factors characterize an economic medium influenced to a lesser extent by
the presence of sustainable reporting. As such, listed Romanian companies register a low rate of
investment growth (InvGr
=0.013), without integrating sustainable actions in this endeavor,
the investment growth rate in companies that do not report sustainably being higher than the one
registered in companies that report such interests (InvGr
=0.001 <InvGr
=0.030). Interest
in social and environmental performance is primarily found in larger companies (Size
=8.401 >
=8.017), with higher work productivity (W
=5.408 > W
=5.304) and an
age (in terms of stock exchange listing) that is lower (AgeSustRep =15.78 <AgeNo-SustRep =16.18).
All variables present with a significant dispersion of values around the average, a situation that is
typical of an emerging economy and stock market, where both the evolutions of financial indicators
and the prices for shares are influenced by many factors, some of which have minor roles in mature
market economies.
The correlation analysis conducted for the purpose of identifying the intensity of connections
between the variables introduced in the study generated the coefficient values synthesized in Table 3.
Thus, we note a significant correlation between WACC and the independent variables regarding
sustainable reporting, as well as partial connections of the other dependent variables (SalesGr and
PBR) with predictors of social and environmental protection activities, respectively. Moreover, no high
intensity connections were identified between the independent variables introduced in econometric
models, which eliminates the risk of occurrence of collinearity relations.
Sustainability 2019,11, 658 11 of 21
Table 3. Pearson correlation coefficients.
Variables SalesGr PBR WACC InvGr Size W Age SustRep IntegRep QualRep SensInd
SalesGr 1 0.126 * 0.149 ** 0.119 * 0.1 43 ** 0.202 ** 0.007 0.073 0.060 0.168 ** 0.065
PBR 1 0.087 0.168 ** 0.165 ** 0.181 ** 0.036 0.028 0.016 0.019 0.153 **
WACC 1 0.128 * 0.354 * 0.331 ** 0.116 * 0.186 ** 0.252 ** 0.217 ** 0.180 **
InvGr 1 0.081 0.097 0.037 0.111 * 0.053 0.028 0.043
Size 1 0.559 ** 0.216 ** 0.311 ** 0.463 ** 0.164 ** 0.029
W10.154 ** 0.116 * 0.251 ** 0.069 0.061
Age 10.052 0.034 0.109 * 0.165 **
SustRep 1 0.648 ** 0.238 ** 0.241 **
IntegRep 1 0.367 ** 0.161 **
QualRep 1 0.136 *
SensInd 1
Notes: **. Correlation is significant at the 0.01 level (two-tailed). *. Correlation is significant at the 0.05 level (two-tailed). Source: Own processing.
Sustainability 2019,11, 658 12 of 21
4.2. Empirical Results
The results obtained upon testing the working hypotheses are presented in a comparative manner,
by revealing the influences generated by each sustainability indicator on the three directions of study
for firms’ growth.
Table 4synthesizes the influence exercised by SustRep on firms’ growth. The presence of
information regarding sustainable activities conducted by the company in the communication with
the external medium has a low impact on SalesGr and PBR, the regression coefficients attached to
the independent variable not being statistically significant (0.472 <Sig <0.880). From a legitimacy
theory viewpoint, the results point to the existence of sustainability actions that are either insufficient
or not adapted to society’s requirements, which do not secure the full acceptance thereof regarding the
conducted activities, that would ultimately lead to obtaining superior economic benefits. The study
generates results that are contrary to the evidence provided by Kuzey and Uyar [
] and Shamil
et al. [
] regarding PBR and Radhouane et al. [
] regarding SalesGr, who identified significant
relations between the aforementioned variables.
Table 4. Influence of sustainable reporting on firms’ growth.
Variables SalesGr PBR WACC
Dependent Variables
0.497 0.486 0.959 0.948 0.438 0.429
(0.002) (0.003) (0.094) (0.101) (0.000) (0.000)
SustRept0.015 0.001 0.011 0.028 0.011 0.004
(0.472) (0.970) (0.880) (0.817) (0.270) (0.812)
SensIndt0.022 0.009 0.214 0.201 0.037 0.026
(0.300) (0.765) (0.004) (0.055) (0.000) (0.063)
SustRept* SensIndt0.025 0.147 0.023
(0.534) (0.860) (0.236)
InvGrt0.139 0.138 0.766 0.767 0.066 0.065
(0.062) (0.063) (0.005) (0.005) (0.060) (0.062)
Wt0.072 0.071 0.208 0.208 0.042 0.041
(0.005) (0.006) (0.026) (0.027) (0.001) (0.001)
Sizet0.009 0.010 0.057 0.057 0.031 0.032
(0.641) (0.623) (0.430) (0.429) (0.001 (0.001)
Aget0.001 0.001 0.010 0.010 0.002 0.002
(0.583) (0.632) (0.295) (0.290) (0.147) (0.117)
R square 0.059 0.060 0.095 0.095 0..205 0.209
Sig Model 0.002 0.003 0.000 0.000 0.000 0.000
Note: The values of significance coefficients are presented between parentheses, with the study considering a
5% risk. Testing was performed for each dependency relation both with and without the variable expressing the
interaction between sustainability indicators and industry sector sensitivity. Source: Own processing.
By accepting a higher risk level, upwards of 5% (27%, respectively), we can reservedly state
that SustRep influences WACC (in the first model associated with this variable). The relationship
between the two variables can reflect the fact that involvement in social and environmental protection
actions raise uncertainties among funding entities with regard to the effects of such actions on the
companies’ performance, uncertainties that materialize in the form of additional requirements on
repaying resources that were made available. Our results are consistent with those of Clarkson
et al. [
] in regard to the impact of environmental reporting, and contrary to the conclusions reached
by Dhaliwal et al. [12] and El Ghoul et al. [28] regarding the impact of CSR.
Sustainability 2019,11, 658 13 of 21
The conjugated action of sustainable reporting in the case of companies in industry sectors that
are sensitive to social and environmental actions (SustRep
* SensInd
) reflects similar connections,
supporting the stated conclusions.
The InvGr and Wcontrol variables exercise a positive and statistically significant influence at
a level comprised between 1% and 10%. It can thus be deemed an indirect influence on the firms’
growth by certain activities that are not reported as sustainable. This is the case for increasing
investments that generate savings in the consumption of resources or that are environmentally friendly,
and the increase in work productivity as a result of motivating and upskilling the staff via training
activities, respectively.
The Age and Size predictors only generate significant influences on WACC, as opposed to
Radhouane et al. [
], who identified a negative yet significant influence between Size and PBR as
well as SalesGr. Large companies determine additional cost-related requirements, while the increasing
period during which the entities are listed facilitates reductions in the cost of attracted capital.
The role of integrated reporting in firms’ growth is reflected via the results presented in Table 5.
Table 5. Impact of integrated reporting on growth indicators.
Variables SalesGr PBR WACC
Dependent Variables
0.535 0.528 1.377 1.565 0.404 0.416
(0.002) (0.002) (0.023) (0.004) (0.000) (0.000)
0.005 0.015 0.152 0.108 0.017 0.033
(0.828) (0.693) (0.059) (0.373) (0.114) (0.063)
SensIndt0.026 0.022 0.237 0.255 0.037 0.044
(0.196) (0.364) (0.001) (0.001) (0.000) (0.000)
IntegRept* SensIndt0.015 0.089 0.024
(0.741) (0.530) (0.248)
InvGrt0.128 0.126 0.712 0.592 0.066 0.069
(0.082) (0.089) (0.009) (0.012) (0.057) (0.046)
Wt0.071 0.072 0.205 0.163 0.041 0.039
(0.006) (0.006) (0.027) (0.048) (0.001) (0.001)
Sizet0.015 0.015 0.112 0.148 0.028 0.029
(0.455) (0.486) (0.113) (0.027) (0.004) (0.003)
Aget0.001 0.041 0.009 0.003 0.002 0.002
(0.587) (0.643) (0.330) (0.743) (0.120) (0.197)
R square 0.058 0.058 0.106 0.102 0.208 0.211
Sig Model 0.002 0.004 0.000 0.000 0.000 0.000
Note: The values of significance coefficients are presented between parentheses, with the study considering a
5% risk. Testing was performed for each dependency relation both with and without the variable expressing the
interaction between sustainability indicators and industry sector sensitivity. Source: Own processing.
Publishing information about sustainable activity also has a low influence on firms’ growth from
this perspective as well. The connection between IntegRep and SalesGr is not statistically significant,
this result being similar to that obtained by Kuzey and Uyar [
], in regards to the relation between
sustainable reporting and operational performance. The influence of integrated reporting on the
prospect of increasing the company’s market value (PBR) is negative (
0.152), similar to the one
identified by Lourenço and Branco [
] in the case of Brazilian firms. In the context of the Bucharest
Stock Exchange (BSE), investors interpret social and environmental protection actions as a limitation
on profitability, thus proving a behavior that is focused on results by any means, which is contrary to
the new vision for sustainable growth. This conclusion can also be backed by the impact of integrated
reporting on the increase of cost of capital (WACC). Funding entities interpret sustainable activities
Sustainability 2019,11, 658 14 of 21
as generators of uncertainties in terms of the capacity to repay the capital following the diminishing
operational performance of companies. Our results are contrary to those obtained by Shad et al. [
who identified a decrease in the informational asymmetry via sustainable reporting substantiated in a
reduction of costs of capital.
The statistical significance and direction of action for the control variables identified in the
connection between SustRep and firms’ growth also remains consistent in the relation of causality
between firms’ growth and integrated reporting.
The quality of reporting expressed in the manner in which sustainability information is
presented—only descriptively or mixed (including quantitative data)—impacts growth indicators by
generating the effects synthesized in Table 6. The quality of report (QualRep) significantly influences
sales’ growth (SalesGr), as entities that also present quantitative information (in addition to narrative
information) information register an increase in operational performance, such connection having
also been identified by Iyer and Lulseged [
]. However, there is no disjunctive effect if the scope of
activity (SensInd) is also introduced in the analysis, which can highlight a low resonance and shallow
interpretation of social and environmental actions in the general economic medium, this case being
contrary to the results obtained by Stacchezzini et al. [
], who note an increasing interest in sustainable
reporting among companies operating in sectors that are sensitive to environmental protection actions.
Investors on the Romanian stock market do not react to this type of information, QualRep not being
statistically significant in relation to PBR, as opposed to the results obtained by Bachoo et al. [
], who
note a direct conditioning between the quality of reporting and the growth prospects of the entity.
Table 6. Influence of sustainable reporting quality on firms’ growth.
Variables SalesGr PBR WACC
Dependent Variables
0.438 0.438 1.038 1.040 0.410 0.410
(0.005) (0.005) (0.041) (0.040) (0.000) (0.000)
QualRept0.102 0.112 0.041 0.293 0.056 0.059
(0.006) (0.279) (0.730) (0.382) (0.001) (0.229)
SensIndt0.019 0.019 0.202 0.212 0.036 0.036
(0.347) (0.345) (0.002) (0.001) (0.000) (0.000)
QualRept* SensIndt
0.012 0.382 0.003
(0.914) (0.286) (0.949)
InvGrt0.141 0.142 0.641 0.664 0.066 0.066
(0.052) (0.052) (0.007) (0.005) (0.054) (0.055)
Wt0.072 0.072 0.167 0.165 0.041 0.041
(0.005) (0.005) (0.042) (0.045) (0.001) (0.001)
Sizet0.004 0.004 0.081 0.079 0.029 0.029
(0.814) (0.817) (0.188) (0.198) (0.001) (0.001)
Aget0.000 0.000 0.004 0.003 0.002 0.002
(0.868) (0.857) (0.594) (0.714) (0.057) (0.061)
R square 0.078 0.078 0.087 0.090 0.226 0.226
Sig Model 0.000 0.000 0.000 0.000 0.000 0.000
Note: The values of significance coefficients are presented between parentheses, with the study considering a
5% risk. Testing was performed for each dependency relation both with and without the variable expressing the
interaction between sustainability indicators and industry sector sensitivity. Source: Own processing.
From the perspective of WACC, entities that present sustainability information in both
quantitatively and descriptively have a higher cost of capital, which confirms previous results. As per
these results, sustainable actions are interpreted as performance diminishing elements that generate
uncertainties regarding the loan repayment capacity, all of these materialized in the form of additional
Sustainability 2019,11, 658 15 of 21
cost-related requirements for resources being made available. The results are contrary to those
identified by Barth et al. [
], who noted no connection between the quality of reporting and the cost
of capital, and by Bachoo et al. [
], who identified a negative connection in this respect. In this case
also, the relations between the control variables and growth indicators remain consistent, in terms of
both the direction of the influence and the statistical significance.
In all relations proposed for estimating the influences generated by sustainable reporting on
firms’ growth, introducing the conjugated effect of the sustainability indicator and the industry sector
sensitivity did not generate a significant influence. This shows that in a Romanian context, reporting
sustainable actions is not perceived as a responsibility by companies whose very own activity affects
the natural and social environments.
From the perspective of econometric models, they adjust the real data in all cases, being statistically
significant (Sigmodel <0.05), but the explanatory capacity varies (0.058 > R2< 0.226).
The models with the highest explanatory capacity and statistical significance express the
connection between sustainable reporting and WACC. Moreover, most of the significant relations
between sustainability indicators and company growth are registered in the case of the relation with
the WACC dependent variable. For this reason, quantile regression was used to go more in-depth with
this deterministic analysis, as presented in Table 7.
Breaking down the analysis into WACC size intervals indicates that sustainable activity has a
negative influence on the cost of capital, but only in the case of entities with relatively low WACC
compared to the average of the sample (those in the Q
and Q
quartiles). In the case of entities with
the highest WACC, namely those in the Q
quartile, the relation to sustainability indicators is not
statistically significant. The significant relation within the lower quartiles is supported by both the
level of significance of the regression coefficients attached to sustainability variables (Sig < 0.05), via
the one on the level of econometric models, and by the extent to which the independent variables
explain the variance of growth indicators (R
models of Q
and Q
are superior to R
of Q
). Thus, we
identified the limited extent to which sustainable reporting contributes to increasing WACC.
Sustainability 2019,11, 658 16 of 21
Table 7. Quantile regression—effect of sustainable reporting on WACC.
Variables WACC
Total Sample Q1 Q2 Q3
0.438 0.404 0.379 0.450 0.305 0.182 0.016 0.028 0.244 0.037 0.028 0.149
0 0 0 (0.009) (0.082) (0.218) (0.186) (0.032) 0 (0.394) (0.517) (0.027)
SustRept0.011 0.048 0.001 0.002
(0.27) (0.022) (0.013) (0.701)
IntegRept0.017 0.020 0.004 0.003
(0.114) (0.007) (0.031) (0.461)
0.040 0.053 0.032 0.006
(0.013) (0.017) (0.062) (0.826)
SensIndt0.037 0.037 0.034 0.072 0.069 0.057 0.002 0.001 0.028 0.009 0.009 0.029
0 0 (0.001) 0 (0.001) (0.002) (0.713) (0.64) 0 (0.075) (0.074) (0.001)
InvGrt0.066 0.066 0.06 0.073 0.09 0.098 0.007 0.008 0.078 0.006 0.006 0.062
(0.06) (0.057) (0.095) (0.292) (0.02) (0.177) (0.253) (0.175) (0.005) (0.709) (0.732) (0.061)
Wt0.042 0.041 0.041 0.001 0.002 0.005 0.005 0.005 0.016 0.006 0.005 0.001
(0.001) (0.001) (0.003) (0.967) (0.98) (0.861) (0.013) (0.009) (0.082) (0.338) (0.361) (0.918)
Sizet0.031 0.028 0.03 0.045 0.03 0.016 0.005 0.007 0.022 0.008 0.007 0.019
(0.001 (0.004) (0.003) (0.059) (0.22) (0.479) (0.001) 0 (0.004) (0.106) (0.162) (0.031)
0.002 0.002 0.002 0.001 0.004 0.006 0.001 0.001 0.002 0.001 0.001 0.003
(0.147) (0.12) (0.155) (0.796) (0.29) (0.116 (0.349) (0.312) (0.037) (0.606) (0.599) (0.007)
R square 0.205 0.208 0.221 0.484 0.42 0.433 0.108 0.141 0.183 0.097 0.101 0.162
Sig Model 0 0 0 0 0.001 0.001 0.027 0.004 0 0.192 0.196 0.062
Note: The values of significance coefficients are presented between parentheses, with the study considering a 5% risk. Source: Own processing.
Sustainability 2019,11, 658 17 of 21
5. Conclusions
The fundamental objective pursued in the activity of any company is continued growth for the
purpose of achieving results that are superior to the investments made. The efficiency of the activity
depends on the optimization of internal operations, but particularly on the reaction of the external
medium. The manner in which a company conveys activity-specific information to all stakeholders is
an element that individualizes it, with implications for its subsequent development. In this context,
sustainability reporting is an instrument by which companies complete the classic set of financial
data with information on the organizational involvement in protecting the environment and in social
actions. This reflects the company’s commitment to adopting a responsible behavior, with favorable
results both for its own development and for the socioeconomic medium it is part of.
The integration of sustainability policies in the operational strategies of companies in Romania is
a challenge, but one that can generate economic benefits for such companies by means of boosting and
streamlining their activities.
This study analyzed the impact of sustainability reporting on company growth. The testing of
our working hypotheses revealed a low contribution of publishing sustainable activities on the growth
indicators of firms. This shows that social and environmental protection actions do not generate
significant reactions on the financial (stock exchange or banking) or real (goods and services’) market,
in line with the results stated by Guidry and Patten [
]. From the perspective of both the legitimacy
theory and the voluntary disclosure theory, the results obtained reflect the existence of sustainability
actions that are either insufficient or not adapted to society’s requirements, and which do not secure
the expected economic benefits.
Our findings are in line with the statements in Stacchezzini [
] and Leszczynska [
which represent that current and potential investors, lenders and business partners alike interpret
sustainability reporting as insufficiently documented and as having a low capacity for integration
within the decision-making process.
However, qualitative indicators that reflect both the type of sustainable activities (SustRep and
IntegRep), and the quality of published reports (QualRep) form significant dependence relations
particularized with various specific measurements specific of the three dimensions of firms’ growth
(PBR,WACC and SalesGr), thus confirming the volatility of the effect sustainable reporting has in the
Romanian economic medium. We thus note the positive influence exercised on the cost of capital by
both SustRep and IntegRep, which reflects increased requirements for repaying the resources made
available by funding entities (shareholders or lenders), as a result of the costs attached to social and
environmental protection actions, this correlation also being confirmed by Clarkson et al. [10].
We also identified a significant correlation, yet in the opposite direction, between integrated
reporting and the prospect of company growth (PBR), which is ascribed to the interpretation of
sustainable activities by shareholders as a limitation on profitability, as confirmed by Lourenço and
Branco [34].
The control variables introduced in the study confirm the significant dependency relations,
particularized on various connections (without following a correlation pattern between a firm’s growth
directions and the indicators of sustainability reporting), which help explain the dependent variable
only if sustainable reporting has a significant influence. Industry sector sensitivity did not generate a
significant influence, which confirms the low relevance of sustainable reporting.
Going more in-depth with the analysis using quantile regression revealed the limited contribution
of sustainable reporting to increasing the cost of capital, only in the case of entities with relatively low
WACC (those in Q1and Q2).
The limitations of the study reside in focusing the analyses exclusively on companies listed on the
main section of the Bucharest Stock Exchange (BSE) and in only using qualitative variables in regard
to measuring sustainable reporting. Future research directions include eliminating these restrictions
by introducing quantitative variables associated with sustainable reporting and extending the scope of
research to include emerging European countries.
Sustainability 2019,11, 658 18 of 21
Author Contributions:
All authors contributed equally to the paper, namely to review the literature, collect data,
apply research methods and interpret the results. Conceptualization, M.C., L.P. and I.E.G.; Data curation, L.P. and
M.-B.A.; Formal analysis, M.C. and L.P.; Methodology, M.C.; Supervision, M.C.; Validation, L.P., M.-B.A. and
I.E.G.; Visualization, I.E.G.; and Writing—review and editing, M.C., L.P., M.-B.A. and I.E.G.
Funding: This research received no external funding.
Conflicts of Interest: The authors declare no conflict of interest.
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... Whilst research has demonstrated the problematic nature of sustainability reporting disclosures (e.g. Accountancy Europe, 2019;Boiral et al., 2019;Boiral et al., 2021;Carp et al., 2019;Cho et al., 2015;Dagiliene and Šutiene, 2019;Soderstrom et al., 2020;Talbot and Boiral, 2015;Tysic, 2021;WBCSD, 2019), extant literature has predominantly looked at the role of factors external to the organisation. By examining the role of information infrastructure, we offer insight into how internal dynamics and organisational context contribute to shape sustainability reporting possibilities. ...
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Purpose: Information infrastructures can enable or constrain how companies pursue their visions of sustainability reporting and help address the urgent need to understand how corporate activity affects sustainability outcomes and how socio-ecological challenges affect corporate activity. We examine the relationship between sustainability reporting information infrastructures and sustainability reporting practice. Design/methodology/approach: We mobilise a sociotechnical perspective and the conception of infrastructure, the socio-technical arrangement of technical artifacts and social routines, to engage with a qualitative dataset comprised of interview and documentary evidence on the development and construction of sustainability reporting information. Findings: We detail how sustainability reporting information infrastructures are used by companies and depict the difficulties faced in generating reliable sustainability data. We illustrate the challenges and measures undertaken by entities to embed automation and integration, and to enhance sustainability data quality. The findings provide insight into how infrastructures constrain and support sustainability reporting practices. Originality/value: We explain how infrastructures shape sustainability reporting practices, and how infrastructures are shaped by regulatory demands and costs. Companies have developed 'uneven' infrastructures supporting legislative requirements, whilst infrastructures supporting non-legislative sustainability reporting remain underdeveloped. Consequently, infrastructures supporting specific legislation have developed along unitary pathways and are often poorly integrated with infrastructures supporting other sustainability reporting areas. Infrastructures developed around legislative requirements are not necessarily constrained by financial reporting norms and do not preclude specific sustainability reporting visions. On the contrary, due to regulation, infrastructure supporting disclosures that offer an 'inside out' perspective on sustainability reporting is often comparatively well developed.
... Integrated reporting will make it easier for investors in their decision-making process to see whether the company is worth investing in or not. In addition, environmental issues, in particular, can provide reasons for investment decisions in favor (or not) of the company (De Villiers et al., 2014;Cooke, 2015;Carp et al., 2019;Calic et al., 2020) because environmental reputation can have a distraction effect on previously obtained information. Environmental issues are sensitive issues for investors when making decisions, so that information about a company's environmental reputation can provide confidence in the company (if its reputation is good) for the investors during their decisionmaking process. ...
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This study is to examine the effect of integrated reporting and environmental reputation on the comprehensive decision-making by non-professional investors. Specifically, this study examines the process investors use to make comprehensive decisions (i.e. acquisition, evaluation, weighting, and judgment) when seeing information about companies’ integrated reporting and environmental reputations. We use a web-based experiment, or 2x3 between-subjects design, to investigate whether companies’ integrated reporting and environmental reputations have any influence on non-professional investors’ comprehensive decision making. 157 participant randomly selected students to serve as surrogate investors in this experiment. The data obtained were then tested using ANOVA and followed by a post hoc test. The findings show that companies that provide integrated reporting and have an environmental reputation make it easier for non-professional investors to make comprehensive decisions. Research on integrated reporting is scarce. There has been some research on the relationship between integrated reporting and investment decision making, but the environmental reputation of the relationship between integrated reporting and investment decisions has not been extensively explored. In fact, environmental issues are global issues. Furthermore, we argue that this research is very important to be carried out in Indonesia, considering that the arrangements regarding the presentation of various information can be carried out in an integrated or separate manner. This study can provide suggestions for regulators about the importance of regulations regarding the obligation to present financial and non-financial information in an integrated manner.
... Studies have investigated the internal benefits of sustainability reporting for performance improvement, including the relationship between sustainability reporting and performance (Mahmoudian et al., 2020) and the impact of sustainability control systems on performance (Lueg & Radlach, 2016) by using numerous methods (Jha & Rangarajan, 2020). There is evidence to suggest that the relationship between sustainability and organizational performance is an important area that requires further research (Carp et al., 2019). Dos Santos et al. (2022) study clarified the importance of governance, assessment and analytical tools, and disclosure practices in promoting sustainable growth and performance. ...
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The purpose of this study is to examine the relationship between sustainability performance (SP) and financial performance (FP), based on performance disclosures (reporting) of the Jordanian financial sector for the period of 2017–2020. The study employs green innovation (GI) indicators as moderating and mediating variables; by using hierarchical regression; as means of unlocking and examining the relationship between SP and FP; through the lens of the stakeholder theory. The hierarchical regression findings suggest that GI indicators partially mediate the relationship between SP and FP, but do not demonstrate a moderating effect. As a main result, it is indicated that Jordanian financial institutions may use SP transparency indicators as an incentive variable, which could influence their overall FP. The research also contributes to the existing literature by adding insight into the use of GI indicators in a developing country and the potential impact on financial institutions markets. These findings lend empirical credence to the generally held belief that increase disclosure benefits for both internal and external users.
... Which this investigation demonstrated, and came out with a positive relationship in states of ROA. However, according to [52] one of the topics that still requires a great deal of research attention is the connection between sustainability and business performance. Consequently, if a company publishes a high-quality SP initiative report, this enhances the firm's worth and the number of investors, it is possible to have a positive correlation between evaluating SP and the firm's value [17,20,53]. ...
This study aims to determine whether executive compensation intends to spur managers to pursue Financial Performance (FP) issues as assessed by sustainability Performance (SP) disclosures, in connection to Jordanian banks from 2018 to 2020, influenced by ROA and Tobin-Q, as FP indicators. Based on stakeholder theory, this study also provides discussion of the mediating function of green accounting indicators (GI). Results showed only a relationship in terms of SP on ROA, according to the regression association between SP and FP. The GI findings indicate that there is no correlation between SP and Tobin-Q as a performance measure, but that there is a mediating role for green accounting indicators within the relationship between SP and FP directed by ROA. This suggests that Jordanian banks may be more inclined to pursue sustainability disclosure indicators in the future and emerging-market exporters’ adoption of more green techniques as an incentive; ultimately, that influences a firm’s financial performance.KeywordsSustainabilityFinancial PerformanceGreen Accounting
... However, as a business entity, a company considers the costs and benefits of issuing a sustainability report. A previous study finds that disclosing sustainability performance is considered to be positive information that helps reduce the decline in stock prices [10]. Moreover, a research on the sustainability reporting IOP Publishing doi:10.1088/1755-1315/1199/1/012025 ...
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Sustainability reporting has been mandated in several ASEAN countries, and the trend toward more extensive reporting is expected to continue due to regulatory and market pressures. Sustainability reporting would be expected to be the subject of external assurance to bring competitive advantage through verifiable quality of sustainability performance information. This study aims to examine the relationship between sustainability performance disclosure and financial performance as well as how external assurance moderates the relationship. This study contributes to the literature by highlighting the importance of external assurance as a quality enhancement mechanism for sustainability performance information. This study employs quantitative research, specifically a regression analysis of empirical cross-section data using samples from 63 listed companies in Indonesia that published sustainability reports in 2020. The sustainability performance disclosure is measured based on the disclosure required by Circular Letter SEOJK/16/2021. Financial performance is measured by price to book value, and the provision of external assurance is used as the moderating variable. The results indicate that sustainability performance disclosure and financial performance do not show a significant relationship unless the sustainability report is externally assured. The assurance has been found to positively moderate the previously insignificant relationship; hence, external assurance was considered a relevant, strong, and credible signal for investors.
... We also include three firm-specific control variables and one macroeconomic control variable. The firm-specific control variables are total assets, total debt, and the price-to-book ratio, which have been used in prior studies (Bernardi and Stark 2018;Aouadi and Marsat 2018;Carp et al. 2019;Melegy and Alain 2020). Total assets reflect the size of the company, total debt indicates the level of leverage and is scaled by total assets, and the price-to-book ratio captures growth opportunities. ...
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The aim of this study is to investigate the influence of integrated reporting (IR) on the cost of financing within the Turkish capital market. Specifically, we analyze the effects of IR on the weighted average cost of capital (WACC), cost of equity (COE), and cost of debt (COD) for companies listed on Borsa Istanbul. Additionally, we explore how IR moderates the relationship between environmental, social, and governance (ESG) scores and the cost of financing. Our panel data analysis reveals a positive association between IR and both WACC and COD, while the impact on COE is not statistically significant. However, the findings suggest that the utilization of IR by companies to enhance the communication of their value-creating activities can mitigate WACC and COD, thus indicating a moderating effect on the relationship between ESG factors and the cost of financing.
... According to (Slater and Narver 1990; Morgan et al. 2009) growth is the organisation ability to recover its investment and reflection of financial improvements as compared to its competitors (Mahmoud, et al., 2017). (Carp, et al., 2019) broke down the firm growth in three direction: the panorama for improved market value, the degree of cost of capital and the operational performance of the organisation. As discussed above, IR is positively associated it the financial performance of organisation ; (Hoque, 2017); (Hussain, et al., 2018), also it attracts more investors through its nonfinancial disclosures. ...
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This study is advancement of study of (Dragu & Tiron-Tudor, 2013) and (de Villiers, Hsiao, & Maroun, 2017), overcoming their limitations and factors left in their study. The revelation is accomplished by studying PESTLE factors and various theories in coincidence with Integrated Reporting (IR). The author revealed that the main factors that encourage the adoption of IR are the matter of self-interest, regulatory pressure, managerial attitude, motivations, market force, disclosure of non-financial parameters, managing different group of stakeholders and development of business model. Furthermore, IR framework is surrounded by various theories i.e. institutional theory, legitimacy theory, innovation diffusion theory, stakeholder theory, stewardship theory, positive accounting theory and the theory of signalling. Subsequently, considering all the possible determinants and the surrounded theory, a conceptual model has been established for the facilitation of adopting IR framework.
... According to Carp & Georgescu, (2019) examined the impact of sustainability on the growth of firms. The impact of sustainability on the growth of firms was assessed in relations of the role of available societal and ecological protection functions (authenticity and information integration), as well as in the relationships of the means by which those products are made distributed (sustainability quality). ...
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This study is to examine the impact of firm sustainability on firm growth as an effect of implementing an ecologically and socially responsible actions: Evidence from USA. This study investigates the relationship between firm sustainability and firm growth. This study examines how firm sustainability affects the firm growth and also explore the measures that can be adopted to examining the role of firm sustainability on firm growth to study this relationship between firm sustainability and firm growth, this study utilized panel data over the period from 2002 to 2018 taken from Thomson Reuters Assets-4 Database. Generalized Method of Moments (GMM) statistical method is employed to measure the relationship among variables. The study is based on Agency theory, Stakeholder theory, Value-Enhancing theory and institutional theory perspective because firm sustainability, its impacts on firm growth is so multidimensional that a single theory cannot justify the issue. The hypothesis is that high Return on Assets (ROA) will cause high firm sustainability is maintained by the empirical findings. Leverage has negative impact on ROA rating since if firm has high debt, it will focus more on financing this debt rather than investing in ROA. Market to book ratio also has a negative impact on ROA rating. Total Assets significantly and positively affects the ROA rating. Other Tangible assets significantly and positive affect the ROA rating. Salaries to assets ratio has a negative impact on ROA. Because, larger firms have more social responsibility, since their information is visible hence, they are more likely to be scrutinized by government, public and special interest groups. This find out some significant implication for the policy makers, ROA plays an important role to manage as well as ultimately provide safe environment to all the stakeholders as well as enhance the firm performance. Therefore, policy makers should follow those policies which enhance the ROA for the mutual benefits of all the stakeholder, firm, country and globe.
Motivated by growing stakeholder demands for environmental, social and governance (ESG) disclosures and enhanced information transparency, this study investigates the relationship between ESG disclosures and future earnings risk in a globally diverse sample of firms. Using fixed‐effects panel regression models and endogeneity controls, we show that ESG disclosures exhibit a substantial negative impact on earnings risk. The sub‐dimensions, except governance, of ESG disclosures also reveal a negative impact on earnings risk. Notably, the social dimension's impact is economically more pronounced than the other ESG disclosure dimensions, indicating that social issues carry more value in reducing the uncertainty surrounding the future earnings risk of a firm. Besides, higher ESG reporting firms benefit more from reducing future earnings risk than low‐reporting firms. Our findings suggest that enhancing information transparency can help alleviate the agency problem arising from information asymmetry between corporate managers and shareholders. Moreover, higher disclosure in various ESG dimensions can address stakeholders' concerns regarding firm's social and environmental impacts.
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This study determined the relationship between Board Experience and Environmental Reporting of quoted Manufacturing Companies in Nigeria ranging from 2008-2020. The study employed secondary data extracted from Nigeria Stock Exchange fact books, annual reports and accounts, stand-alone sustainability reports of sample firms. The study adopted Ex-post facto research design while the panel data sets were analyzed using Descriptive Statistics, Multicollinearity Test, and Hausman test via E-Views 10.0. The result revealed that there is a significant and positive relationship between board experience and environmental reporting; (t-Statistic = 2.319331; p-value = 0.0210 < 0.05); It was recommended inter alia that firms should consider increasing the number of experienced board members because this will contribute to improving corporate disclosure and consequently reduce information asymmetry, which not only clarifies the conflicts of interests between shareholders and management but also makes management more accountable.
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This study aims to investigate whether firm performance influences corporate social responsibility reporting of Chinese listed companies. We have used the sample of all A-share listed firms on Shenzhen and Shanghai stock exchanges for the period 2008 to 2015. The authors used pooled ordinary least squares (OLS) regression as a baseline methodology. To control the possible problem of endogeneity we use one year lagged and two-stage least squares regression. We find that firm performance has a statistically significant impact on CSR reporting. Moreover, we see that firms with high performance are more likely to report CSR activities than low-performance firms. Additionally, five of the control variables (board size, CEO power, SOE, firm size, and Big4) have some influence on CSR reporting. These findings hold for a set of robustness tests. Our results have implications for the development of CSR reporting in developing countries like China. Our research suggests that, in China, companies with better financial performance undertake more CSR reporting. The paper contributes to the existing literature by investigating the effect of firm performance on CSR reporting of Chinese listed companies. Additionally, this paper enriches the current literature on CSR reporting and highlights the importance of a firm's financial performance for better environmental performance and reporting.
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Purpose The purpose of this paper is to systematise the research field of sustainability reporting. The authors contribute to closing this research gap and, on the basis of this systematisation, address the research question of what are the drivers of sustainability reporting. Design/methodology/approach The paper systematically reviews existing studies and analyses drivers of sustainability reporting using a qualitative approach. The authors intend to demonstrate and discuss the wide range of approaches used in literature. Findings The review suggests that firm size, media visibility and ownership structure are the most important drivers of the disclosure of sustainability reports, while corporate governance only seems to have an influence on the existence of audit or sustainability committees. In contrast, other determinants such as profitability, capital structure, firm age or board composition as an indicator of corporate governance do not show a clear tendency. Originality/value The authors systemise the research field related to sustainability reporting to give an overview of the current research landscape that is not influenced by environmental or social reporting and discuss the identified determinants and the related variables. This results in a comprehensive report of what is known and unknown about the questions addressed in the systematic review.
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Non-financial disclosure has become increasingly popular, as it can satisfy the information needs of a growing range of stakeholders. Because traditional financial reports cannot provide comprehensive accountability, several frameworks and guidelines for facilitating non-financial information disclosure have been developed. Recently, the European Union issued Directive 2014/95/EU (EU Directive) and subsequent guidelines (EU Guidelines 2017/C215/01 [EUG]) to mandate European entities of public interest to convey non-financial information to improve such organizations’ accountability toward their stakeholders. This paper studies the European stage of non-financial reporting from a regulatory and practical point of view. To this end, the first research objective is to analyze the elements that the EUG have in common with the IIRF and the GRI 4 guidelines. Second, the paper proposes a first analysis to assess the compliance to the EUG by performing a content analysis on a sample of annual reports and integrated reports (IR) drafted by the 50 biggest European companies. The results highlight that the content elements required by the Directive exceed the requirements of the two frameworks and that there is already a high level of compliance by European big companies with the EUG. More specifically, particular attention is devoted to Social, Employee and Environmental Matters. Accordingly, the companies demonstrated a common awareness of the necessity to provide an exhaustive amount of social and environmental disclosure in order to maintain legitimacy. Also the disclosure on Principal Risks and Their Management is widespread to meet investors’ and stakeholders’ requirements in recent years with respect to the general level of risk disclosure provided by companies.
Purpose This study aims to evaluate the impact of corporate governance on sustainability reporting by investigating companies operating in the Australian resources industry. Design/methodology/approach This study investigates the relationships between the total sustainability disclosures and, separately, the three aspects of sustainability disclosures – economic, environmental and social – and corporate governance mechanisms proxy by various attributes of board composition. The sustainability disclosures were scored using Ong et al.’s (2016) index. Findings Significant positive correlations were found between the extent of sustainability disclosures and the proportion of independent directors, multiple directorships and female directors on the board. Originality/value Unlike traditional content analysis methods, this study adopts a newly developed Global Reporting Initiatives-based reporting index that identifies companies with good sustainability performance by aligning companies’ disclosures to their sustainability performance.
Abstract This study aims to explore the extent and nature of sustainability reporting practices of the largest public oil and gas companies in Russia. It further investigates the impacts of possible underlying factors on the quality of sustainability information in the given emerging economy. This study uses data on sustainability performance manually collected from sustainability reports and annual reports and financial data extracted from audited financial statements available on company websites. The results reveal that standalone sustainability reporting, firm age, and auditor type are the main factors in the dissemination of sustainability information in the Russian context. The findings suggest that companies with a share of foreign ownership disclose more transparent sustainability information than companies owned only by local investors. Additionally, companies that prepare sustainability reports only in Russian provide more valuable sustainability information than companies that publish reports in both English and Russian. The findings of the study are useful for regulators, policymakers, global investors, and managers in promoting the high application standards of the Global Reporting Initiative framework, formulating corporate disclosure policies for listed companies, and developing sustainability practices in the context of emerging markets. Keywords Sustainability Reporting; Global Reporting Initiative; Oil and Gas Industry; Russia; Emerging Markets
The purpose of this paper is explore the extent to which environmental indicators disclosed in corporate sustainability reports address the broader ‘sustainability context’ in which companies operate. This was achieved by analyzing the types of environmental performance indicators present in a sample of sustainability reports issued by sustainability leader companies in Canada. The data collected was used to map out the relative frequencies and distributions of context-based and self-referential indicators across the different environmental performance areas addressed in the reports. Context-based indicators address the broader socio-ecological system within which a company operates; self-referential indicators do not. Of the 463 environmental indicators identified, none were found to be context-based. Instead, the reports relied exclusively on absolute indicators (57% of all indicator types identified) and relative indicators (37%) to represent their environmental performance data — as well as two other previously-unstudied categories of non-context indicators. These were labelled equivalent (5%) and benchmark indicators (<2%). The relative proportions of these non-context types were found to differ across the various environmental areas disclosed. This research is one of the first to undertake a complete study of the context-based reporting phenomenon as practiced today. In so doing, it described the extent of self-referential reporting, even among sustainability leader firms. This study also described the indicator strategies that the study companies were using to make the performance data presented more meaningful to the reader, in the absence of context.
Based on the fact that shareholders respond to environmental initiatives according to their perception of the potential related benefits, this study investigates whether customer-related performance affects the value relevance of voluntary environmental reporting. This paper provides a better understanding of the circumstances under which shareholders react positively to voluntary environmental information disclosed by firms operating in environmentally sensitive industries. Using a sample of French listed firms belonging to the SBF 120 stock index over an eleven-year period (2001-2011), our results show that a higher level of environmental disclosure is valued negatively by shareholders for firms operating in environmentally sensitive industries. In line with cost-benefit analysis, shareholders are found to rely more on profitability-based performance (i.e., return on sales and return on assets) than on revenue-based performance (i.e., sales growth) when assessing the relevance of environmental reporting for firms operating in environmentally sensitive industries.
Purpose The purpose of this paper is to study whether corporate sustainability impacts profitability performance. Design/methodology/approach The sample under study consists of 58 Indian firms that are consistently a part of Thomson Reuters Asset 4 ESG database. An empirical multivariate panel data model is developed to analyse the impact of sustainability (environmental, social and governance) on firm profitability. Further, the study seeks to understand whether firms ranked high on sustainability parameters perform better compared to low-ranked firms. This has been tested by applying parametric t-test. Findings The study reveals a significant positive relationship between sustainability and firm performance measures (return on invested capital, return on equity, return on assets and earnings per share). Empirical evidence suggests that firms that practice remarkable sustainable development strategies report higher profitability and have substantially low gearing level. Research limitations/implications This study provides empirical support for the practitioners, policy makers and academicians emphasising strongly on the role played by deployment of sustainable environmental, social and governance efforts in enabling firms to achieve the profit maximisation objective. In the long term, strategies that take sustainability criteria into account have the capacity to create long-term value and provide firms with competitive advantage. The findings provide impetus to many mid- and large-capitalised Indian firms to initiate the adoption of sustainable measures in business policy formulation. The market valuation perception on sustainability practices followed by Indian firms leaves scope for future research. Originality/value Empirical evidence on the link between sustained sustainability efforts by corporates and their profitability from a developing nation context is limited. This paper provides much-needed evidence in the area of sustainability performance from India – one of the largest, rapidly developing economies in the world.