Determinants and consequences of corporate sustainability performance and disclosure

Abstract

Since the UN Conference on the Human Environment, held in Stockholm in 1972, and following the great resonance of the Bruntland report issuance in 1987, corporate sustainability has climbed the ranking of governance priorities. Sustainability and Corporate Social Responsibility (CSR) reporting have become an increasingly relevant topic in business and academia. The body of knowledge about the determinants and outcomes of sustainability reporting has grown in last two decades. Although the relationships between key elements of corporate governance (CG) and the sustainability disclosure is a research question of many studies in recent literature, to the best of our knowledge no major reviews of the developments in this field have so far been presented. Similarly, last three decades have witnessed a huge amount of research trying to establish how company’s sustainability performance (SP) is related with financial performance (FP). Researchers have applied various methods and theoretical frameworks to investigate this relationship but results are still fragmented and competing.

Keeping in view the fragmented results in the domain of corporate sustainability research, in this research I developed three related studies on determinants and consequences of corporate sustainability performance disclosure. In first essay I present a systematic review of 201 outcomes from 49 studies published in business, management, and accounting journals from year 1992 to 2014. Based on the discursive review and analytical results, we recognize the need of theory development to explain the underlying relationship. Findings provide concrete bases for theorizing the underlying relationship and development of a new comprehensive theoretical framework which can provide rationale to explain existing and future empirical evidences.

In second study I empirically examine determinants of the relationship between corporate governance and various dimensions of sustainability performance in the context of dominant theories in CG and CSR nexus. The study is first attempt to quantify the sustainability performance using specific performance criteria. I apply manual content analysis on sustainability reports of US based companies and measure triple bottom sustainability performance. The empirical findings reveal that not all the governance mechanisms are equally important to foster triple bottom line performance of company. The most important implication for practitioners is the support for sustainability practices, which may be gained through implementation of specific mechanisms of corporate governance. Findings of the study intrigue the rethinking process about effectiveness of sustainability performance reporting frameworks.

In third essay, I analyze the relationship between SP measures (Economic, Environmental, and Social) and FP. Data for all SP dimensions are obtained by applying manual content analysis. Differently from existing literature, in this study sustainability disclosure (SD) and SP are considered jointly through a composite index. The compliance of sustainability report with Global Reporting Initiative (GRI) guidelines ensures a high degree of comparability and quality of information provided by the companies. Results obtained from fixed effect regression models reveal that the economic performance information is not relevant, while the impact of environmental and social dimensions of sustainability remains relevant and significant across different measures of FP. No evidence shows any relation between SP and capital structure. The use of control sample further corroborates the relevance of sustainability dimension to explain changes in FP.