Environmental Disclosure and Financial Performance of Firms in Kenya: A Stakeholder Approach

Abstract

Using panel data analysis this study examined the influence of environmental disclosure in annual reports on financial performance of companies listed on the Nairobi Securities Exchange in Kenya. Environmental disclosure information was collected using quantitative content analysis for the period 2007-2015 while financial performance data was collected for the period 2008-2016, a one-year lag behind the environmental disclosure data. Control variables were firm size, industry type and leverage. Environmental disclosure was found to be statistically significantly positively related to the firms' return on assets but not statistically significant with return on equity and Tobin's Q. The overall results suggest that disclosing environmental activities neither improves financial performance nor deteriorates it.

Corporate Sustainability and Shareholders’ Wealth in the National Financial Sector

“…This suggested that corporate sustainability had a positive effect on shareholders' wealth in the national financial sector in Nigeria. This is consistent with previous studies by [30,34,29,32,39,25,[51][52][53]. For instance, Pedron et al looked into how environmental disclosure affected Sustainable Stock Returns (SSR) and market share prices of companies listed in Brazil, and they discovered that environmental disclosure had a favourable impact on both stock returns and market values of the sampled companies listed in Brazil [30].…”

“…The research of Pedron et al and Wara et al complement one another. The study's findings showed that environmental disclosure indices in the examined region had a favourable and significant impact on company performance as evaluated by Tobin's Q [30,34].…”

Environmental Disclosure and Return on Assets of Manufacturing Companies Listed in Nigeria

“…The result of the regression analysis revealed that environmental disclosure measured using economic, social and governance (ESG) revealed a positive significant effect on return on assets and corporate sustainability reporting of the selected and sampled companies in Nigeria. Emeka et al (2020) had a result that is in concordance with the result obtained by (Wara et al, 2020). The study concluded that environmental disclosure had a positive influence on the corporate profitability of the companies sampled.…”

“…The result of the study revealed that corporate performance measured using Tobin's Q and return on assets (ROA) was positively and significantly affected by environmental disclosure indices. Wara et al (2020)'s result is not different from the result derived from (Nguyen & Tran, 2019). The regression analysis revealed that environmental accounting disclosure had a positive significant association with financial performance for the period under consideration in the study.…”

“…In opposition to the result of Emeka et al (2020): Qiu et al (2014) found that there was a negative significant relationship between environmental disclosure and profitability. Wara et al (2020) examined the effect of environmental disclosure on the corporate performance of firms quoted on the floor of the Nairobi Stock Exchange. The study took an expo facto as the technique for the study, while the secondary data was employed for a period of 14 years covering from 2007 to 2015.…”