Moderating Effect of Corporate Governance on the Relationship between Social Sustainability Reporting and Firm Value: Evidence from the Nairobi Securities Exchange, Kenya

Wilberforce Serem; Patrick Gudda; Maurice Ombok; Caleb Manyaga

doi:10.37284/eajbe.7.2.2398

Wilberforce Serem Maasai Mara University
Patrick Gudda Maasai Mara University
Maurice Ombok Maasai Mara University
Caleb Manyaga Maasai Mara University

DOI: https://doi.org/10.37284/eajbe.7.2.2398

Keywords: Corporate Governance, Social Sustainability Reporting, Firm Value

Share Article:

Abstract

Purpose: The main purpose of this study was to examine the moderating effect of corporate governance on the relationship between social sustainability reporting and firm value among companies listed in the Nairobi Securities Exchange, Kenya. Methodology: The study's target population include all 64 NSE-listed companies. The study employed secondary data collected by the use of the annual reports sourced from NSE and firms’ websites for eleven (11) years from 2012-2022. Content analysis technique was employed for the collection of secondary data using data collection sheets. This research used a longitudinal research approach and correlation research design. Results: The study found that social sustainability reporting had an insignificant effect on firm value among companies listed on the Nairobi Securities Exchange. Additionally, corporate governance was shown to have no significant moderating influence on the relationship between social sustainability reporting and firm value. Conclusion/Implication: These findings suggest that companies should reconsider the relevance and quality of their social sustainability reports to better align with stakeholder expectations. Enhanced transparency and storytelling regarding social impacts are necessary to improve investor engagement

Downloads

Download data is not yet available.

References

Al-Shaer, H. & Zaman, M. (2016), “Board gender diversity and sustainability reporting quality”, Journal of Contemporary Accounting and Economics, Vol. 12 No. 3, pp. 210-222.

Asngar, T. M., Nkoa, B. E. O., & Zambo, C. C. A. (2022). Does colonization explain the low level of growth in African financial markets? Economic Systems, 46(3), 101013.

Astuti, A. D. & Juwenah, J. (2017). Sustainability Report Terhadap Nilai Perusahaan Yang Tergabung Dalam LQ 45 Tahun 2012-2013. Accounthink: Journal of Accounting and Finance, 2(01).

Asuquo, A. I., Dada, E. T. & Onyeogaziri, U. R. (2018). The effect of sustainability reporting on corporate performance of selected quoted brewery firms in Nigeria. International Journal of Business and Law Research, 6(3), 1-10.

Atanda, Fatai (2021). Sustainability Reporting and Firm Value: Evidence from Selected Deposit Money Banks in Nigeria. 7. 47-68.

Bellucci, M., Simoni, L., Acuti, D. & Manetti, G. (2019). Stakeholder engagement and dialogic accounting: Empirical evidence in sustainability reporting. Accounting, Auditing and Accountability Journal.

Berle, A. A. & Means, G. C. (1932). The modern corporation and private property. Harcourt, Brace.

Bertoncelli, F., Fandella, P. & Sironi, E. (2021). The Relationship between Governance Quality and the Cost of Equity Capital in Italian Listed Firms: An Update. Journal of Risk and Financial Management, 14(3), 131.

Burzillo, S., Shaffer, M., & Sloan, R. G. (2022). Who Uses Corporate Sustainability Reports? USC Marshall School of Business Research Paper Sponsored by iORB.

Chang, C.-C., Hsu, Y.-F., Huang, W.-C. & Lee, C.-C. (2017). Does corporate governance influence firm performance and sustainability reporting? Corporate Governance: An International Review, 25(2), 132–150.

Cheng, R., Kim, H., & Ryu, D. (2023). ESG performance and firm value in the Chinese market. Investment Analysts Journal, 1-15.

Child, J. (1979). Organization: A guide to problems and practice. Harper and Row.

Ching, H. Y., Gerab, F. & Toste, T. H. (2017). The quality of sustainability reporting and corporate financial performance: Evidence from Brazilian listed companies. SAGE Open, 7(2)

Chiu, T.K. & Wang, Y.H. (2015), “Determinants of social disclosure quality in Taiwan: an application of stakeholder theory”, Journal of Business Ethics, Vol. 129 No. 2, pp. 379-398.

Chung, K. H., and Pruitt, S. W. (1994). A simple approximation of Tobin's q. Financial management, 70-74.

Core, J. E., Guay, W. R. & Verrecchia, R. E. (2006). Agency problems and asset valuation. The Review of Financial Studies, 19(3), 855-889.

Cormier, D. & Gordon, I. M. (2001). An examination of social and environmental reporting strategies. Accounting, auditing and accountability journal.

Cormier, D., Ledoux, M. J. & Magnan, M. (2019). The informational contribution of social and environmental disclosures for investors. Management Decision.

De Villiers, C., Henneberg, S. C. & Blignaut, J. N. (2017). The association between sustainability disclosure, firm value, and the cost of capital: An empirical study. Sustainability Accounting, Management and Policy Journal, 8(1), 82-108.

Deegan, C. (2002). Introduction: The legitimizing effect of social and environmental disclosures–a theoretical foundation. Accounting, auditing and accountability journal.

Di Tullio, P., La Torre, M., & Rea, M. A. (2021). Social media for engaging and educating: From universities’ sustainability reporting to dialogic communication. Administrative Sciences, 11(4), 151.

Dienes, D., Sassen, R. & Fischer, J. (2016). What are the drivers of sustainability reporting? A systematic review. Sustainability Accounting, Management and Policy Journal.

Dittmar, A. K. (2011). Agency problems in financial reporting: An overview. Contemporary Accounting Research, 28(3), 777-816.

Doorasamy, M. (2021). Capital structure, firm value and managerial ownership: evidence from East African countries. Investment management and financial innovations, 18(1), 346-356.

Eccles, R. G., Ioannou, I. & Serafeim, G. (2019). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835-2857.

Faisal, F., Tower, G. & Rusmin, R. (2012), “Legitimizing corporate sustainability reporting throughout the world”, Australian Accounting, Business and Finance Journal, Vol. 6 No. 2, pp. 19-34.

Friske, W., Hoelscher, S. A., & Nikolov, A. N. (2023). The impact of voluntary sustainability reporting on firm value: Insights from signalling theory. Journal of the Academy of Marketing Science, 51(2), 372-392.

Gray, R., Adams, C. & Owen, D. (2014). Accountability, Social Responsibility and Sustainability: Accounting for Society and the Environment. Pearson Higher Ed

Hahn, R. & Kühnen, M. (2013). Determinants of sustainability reporting: a review of results, trends, theory, and opportunities in an expanding field of research. Journal of Cleaner Production, 59, 5-21.

Hendratama, T. D., & Huang, Y. C. (2021). Corporate social responsibility, firm value and life cycle: evidence from Southeast Asian countries. Journal of Applied Accounting Research, 22(4), 577-597.

Hirdinis, M. (2019). Capital structure and firm size on firm value moderated by profitability. International Journal of Economics and Business Administration, 7(1), 174-191.

Jamil, A., Mohd Ghazali, N. A., & Puat Nelson, S. (2021). The influence of corporate governance structure on sustainability reporting in Malaysia. Social Responsibility Journal, 17(8), 1251-1278.

Jensen, M. C. & Meckling, W. H. (1976). Theory of the firm: Managerial behaviour, agency costs and ownership structure. Journal of financial economics, 3(4), 305-360.

Kariuki, G. (2019). Sustainability reporting in Kenya: A review of existing practices, challenges and prospects. International Journal of Business and Management, 14(7), 61–72.

Laeven, M. L., Ratnovski, M. L. & Tong, M. H. (2014). Bank size and systemic risk. International Monetary Fund.

Laskar, N. (2018). Impact of corporate sustainability reporting on firm performance: an empirical examination in Asia. Journal of Asia Business Studies.

Liao, L., Luo, L. and Tang, Q. (2015), “Gender diversity, board independence, environmental committee and greenhouse gas disclosure”, The British Accounting Review, Vol. 47 No. 4, pp. 409-424

Loh, Lawrence and Thomas, Thomas and Wang, Yu. (2017). Sustainability Reporting and Firm Value: Evidence from Singapore-Listed Companies. Sustainability. 9. 2112. 10.3390/su9112112.

Mahoney, J. T. (2023). Corporate personhood and fiduciary duties as critical constructs in developing stakeholder management theory and corporate purpose. Strategy Science, 8(2), 212-220.

Maroun, W., Coldwell, D. and Segal, M. (2014), “SOX and the transition from apartheid to democracy: South African auditing developments through the lens of modernity theory”, International Journal of Auditing, Vol. 18 No. 3, pp. 206-212.

Martínez, J. B., Fernández, M. L. & Fernández, P. M. R. (2016). Corporate social responsibility: Evolution through institutional and stakeholder perspectives. European journal of management and business economics, 25(1), 8-14.

Nobanee, H. & Ellili, N. (2016). Corporate sustainability disclosure in annual reports: Evidence from UAE banks: Islamic versus conventional. Renewable and Sustainable Energy Reviews, 55, 1336-1341.

Ntim, C.G. and Soobaroyen, T. (2013), “Black economic empowerment disclosures by South African listed corporations: the influence of ownership and board characteristics”, Journal of Business Ethics, Vol. 116 No. 1, pp. 121-138.

Odriozola, M.D. and Baraibar-Diez, E. (2017), “Is corporate reputation associated with quality of CSR reporting? Evidence from Spain”, Corporate Social Responsibility and Environmental Management, Vol. 24 No. 2, pp. 121-132.

Park, B.-J. (2021) Corporate Social and Financial Performance: The Role of Firm Life Cycle in Business Groups. Sustainability, 13, 7445. https://doi.org/10.3390/su13137445

Platonova, E., Asutay, M., Dixon, R., & Mohammad, S. (2018). The impact of corporate social responsibility disclosure on financial performance: Evidence from the GCC Islamic banking sector. Journal of Business Ethics, 151, 451-471.

Saiti, K. (2015). The Relationship Between Social Accounting Reporting and Stock Returns of Companies Listed at the Nairobi Securities Exchange (Masters dissertation, University of Nairobi).

Serem W. K., Gudda P., Ombok M. & Manyaga C. B (2024). Effect of Sustainability Reporting on Firm Value: Evidence from the Nairobi Securities Exchange, Kenya. Journal of Finance and Accounting. Vol 8(1) pp. 29-49 https://doi.org/10.53819/81018102t2302

Shalihin, M. Y., Suharman, H. & Hasyir, D. A. (2020). Impact of Corporate Sustainability on Firm Value: Indonesian Context. Journal of Accounting Auditing and Business-Vol, 3(1).

Shamil, M., Shaikh, J. and Krishnan, A. (2016), “The influence of board characteristics on sustainability reporting”, Asian Review of Accounting, Vol. 22 No. 2, pp. 78-97.

Swarnapali, R.M. N. C. and Luo. (2018). Corporate Sustainability Reporting and Firm Value: Evidence from a Developing Country. 10. 69-78.

Tariverdi, Y., Lashgari, Z. & Jalalpour, M. (2014). Investigations of effect of institutional shareholders, ownership concentration, return of assets and discretionary accruals on restatement of financial statements. International Research Journal of Applied and Basic Sciences, 8(8), 986-92.

Tilt, C. A., Qian, W., Kuruppu, S., & Dissanayake, D. (2021). The state of business sustainability reporting in sub-Saharan Africa: an agenda for policy and practice. Sustainability Accounting, Management and Policy Journal, 12(2), 267-296.

Uwuigbe, U., Erin, O., Uwuigbe, O., Peter, D. and Jinadu, O. (2017b), “International financial reporting standards and stock market behaviour: an emerging market experience”, Corporate Ownership and Control, Vol. 14 No. 4, pp. 93-102.

Wachira, M. M., & Berndt, T. (2019). Exploring the content of sustainability reporting (SR) disclosures among public companies in South Africa, Mauritius and Kenya. In ICAB Conference Proceedings.

Weber, M. (1968). Economy and society. University of California Press.

Windolph, S.E., Schaltegger, S. and Herzig, C. (2014), “Implementing corporate sustainability: what drives the application of sustainability management tools in Germany?”, Sustainability Accounting, Management and Policy Journal, Vol. 5 No. 4, pp. 378-404.

Yudistira, D., Ahmadi, S. & Zayidin, E. (2017). The effects of sustainability reporting on firm performance: Evidence from Indonesia. Journal of Cleaner Production, 156, 590–599.