Nexus between sustainability reporting and firm performance: Moderating role of financial slack
DOI:
https://doi.org/10.71085/sss.04.02.310Keywords:
Financial Performance, Sustainability Reporting, Financial Slack Resources, Firm Size, Firm Leverage, Ordinary Least Squares (OLS), Return on Asset, Tobin’s Q, Fixed Effect ModelAbstract
Financial performance is a key indicator of a firm’s financial health over a specific period, considering various financial, operational, and sustainability factors. This study examined the effect of sustainability reporting on firm performance and also the moderating role of financial slack resources in this relationship. The research used secondary data from 548 firms across five developed Asian countries from 2010 to 2020, collected from the Thomson Reuters Asset4 ESG database. The findings revealed that sustainability reporting has a positive and statistically significant impact on firm performance, measured by return on assets (ROA) and Tobin’s Q. Firms that do not engage in sustainability reporting face negative effects on their performance, while those with more robust sustainability reporting tend to perform better. Additionally, as proxied by ROA, financial slack resources have a negative but statistically insignificant effect on the relationship between sustainability reporting and firm performance. The effect is positive but insignificant when measuring performance by Tobin’s Q. This implies that access to financial slack resources does not directly require developed economies to function, but may influence managers to view slack resources as a long-term investment in sustainability reporting.
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Data Availability Statement
The data that support the findings of this study are available from the corresponding author upon reasonable request.
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