The effect of sustainability accounting disclosures on financial performance: an empirical study on the Jordanian banking sector

Abstract

This study aims to examine the effect of sustainability accounting disclosure on the financial performance of banks operating in Jordan during the period of 2013–2017. The study focused on the effect of economic, environmental and social disclosures on financial performance. To achieve the study objective, the content analysis method was used. The dimensions of sustainability accounting disclosure were measured through indicators that have been developed for this purpose, which are in accordance with Global Reporting Initiative (GRI) (G4-2013). The study results revealed that there is a statistically significant effect of sustainability accounting disclosure on the financial performance. In addition, the study results revealed that the disclosure of the economic and social dimensions had a positive effect on return on equity (ROE). While the environmental dimension did not affect the return on equity (ROE). In addition, the results of the study revealed that the disclosure of sustainability dimensions (economic, social and environment) had a combined effect on the return on assets (ROA). This means that the banks operating in Jordan give more priority to the economic dimension disclosure, than to the social and environmental dimensions.In reviewing previous studies in the accounting literature, it has been found that there is a paucity of studies that examine the concept of sustainability accounting, especially in the Jordanian banking sector. Therefore, this study constitutes value to this field.

Sustainability reporting in banks: History of studies and a conceptual framework for thinking about the future by learning from the past

“…The SRBS studies have analyzed both topics from multiple perspectives, arriving at divergent results which hinder the identification of a single trend line. Financial performance (Al‐Dhaimesh & Al Zobi, 2019; Buallay, 2019; Buallay, 2020a; Buallay, 2020b; Buallay, Fadel, Alajmi, & Saudagaran, 2020; Buallay, Fadel, Al‐Ajmi, & Saudagaran, 2020; Maama, 2021; Semuel et al, 2019; Supriyadi et al, 2019), which studies have frequently found to have a positive relationship with sustainability reporting, was examined both as a dependent and independent variable and was measured using the most various indicators (ROA, ROE, share value, etc.). Corporate governance was also checked through multiple variables (Buallay & Al‐Ajmi, 2020; García‐Sánchez et al, 2020; Kiliç et al, 2015)—such as shareholder composition, age and gender of directors and auditors, family ownership—often found to be influential on sustainability reporting.…”

Does environmental reporting of banks affect their financial performance? Evidence from India

“…The results reflect that reporting CSR activities improved the bank's financial performance, measured by ROA and ROE. Moreover, other studies also claim a positive association between environmental reporting and financial performance (Al-Dhaimesh and Al Zobi, 2019; Hongming et al. , 2020).…”

“…The results reflect that reporting CSR activities improved the bank's financial performance, measured by ROA and ROE. Moreover, other studies also claim a positive association between environmental reporting and financial performance (Al-Dhaimesh and Al Zobi, 2019;Hongming et al, 2020). A study by Menicucci and Paolucci (2022) on Italian banks empirically proved that the environmental dimension of sustainability has a positive and significant impact on the bank's performance.…”

“…Furthermore, an insignificant association is found between environmental reporting and the financial performance of institutions. Al-Dhaimesh and Al-Dhaimesh and Al Zobi (2019) examined the effects of sustainability disclosure on the financial performance of Jordan banks. The findings reflect no significant association between the environmental reporting dimension and the financial performance measured by ROE.…”

Achieving Financial Sustainability in Ghana’s Banking Sector: Is Environmental, Social and Governance Reporting Contributive?

“…This finding also implies that ESG reporting reduces the financial performance of banks. A related study conducted by Al-Dhaimesh and Al Zobi (2019) in Jordan found that environmental disclosure had no impact on the performance of banks whilst the aggregate ESG reporting had a significant positive impact on the financial performance of banks.…”