The impact of sustainability reporting quality on the value relevance of corporate sustainability performance

Abstract

The value relevance of corporate sustainability performance (CSP) has been studied from different theoretical perspectives, yielding inconclusive evidence. Therefore, it is imperative to revisit corporate sustainability performance relevance for investors. This study explores the value relevance of corporate sustainability performance by studying the impact that the quality of sustainability reporting has on it. It employed the panel data of 247 firms from 2012 to 2016 for the best 30 green capital markets ranked by the Global Green Economy Index. The results indicated that investors value corporate sustainability performance (achieved through social, economic, and corporate governance dimensions only) and the quality of sustainability reporting. However, the environmental dimension of CSP lacks financial materiality for investors. Furthermore, the quality of sustainability reporting plays an instrumental role in the value relevance of the corporate governance dimension because it is perceived as an alternative corporate governance mechanism by investors. The findings are useful for practitioners, regulators, and other stakeholders interested in understanding the value relevance of corporate sustainability performance and quality of sustainability reporting.

The model for measuring the Quality of Sustainability Reporting and Determinants: Application Analytic Network Process Fuzzy DEMATEL-Based Technique

“…Despite the introduction of new regulatory requirements, the quality of sustainability reporting continued to improve, according to the findings of the study. Jadoon et al (2021) assessed the impact of sustainability reporting quality on sustainable corporate performance information content using data from 247 enterprises in 21 countries and the Green Economic Growth Index. The findings of the regression analysis revealed that the information content of sustainability performance derived from economic, social, and corporate governance components.…”

“…As a result, nonfinancial research's informative substance focuses more on corporate sustainability performance and its dimensions (Aureli et al, 2020). This hypothesis includes quantitative and qualitative criteria as a major component in understanding stock price movements at the same time (Jadoon et al, 2021).…”

Stakeholder engagement practices and impression management

“…Communicating with stakeholders should allow organisations to identify key sustainability issues that need to be addressed in strategic sustainability management and that should be at the core of sustainability reporting. In this way, organisations can effectively be accountable for their sustainability initiatives and produce higher quality sustainability reports, thus contributing to the value relevance of sustainability reporting sought by investors (AA1000, 2015; Jadoon et al, 2021). Some scholars, like Rensburg and de Beer (2011), insist that the entire stakeholder engagement process boils down to just plain good governance.…”

Sustainability Reporting and Performance of Listed Upstream Oil and Gas Firms in Nigeria: A Content Evaluation Approach

“…There is as yet no consensus on theoretical propositions on corporate behaviour and propensity towards corporate sustainability performance (CSP) and corporate sustainability reporting (CSR) (Belal & Roberts, 2010;Deegan, 2002;Gray, Adams, & Owen, 2014;Gray, Kouhy, & Lavers, 1995;Gray, Owen, & Adams, 2009). Consequently, CSP/CSR has been studied from different theoretical perspectives, with conflicting or inconclusive evidence (See: (Jadoon, Ali, Ayub, Tahir, & Mumtaz, 2020)). Deegan (2002) was categorical about the absence of "an accepted theory for social and environmental accounting, [and] there is much variation in the theoretical perspectives being adopted".…”