Abstract:
Sustainability Reporting (SR) is followed by the organizations in the contemporary
world. The main objective of the organizations is getting growth consistently and
sustaining for a long period of time. In today’s changing and complicated business
world, the Sustainability related activities have an impact on Corporate Financial
Performance (CFP) of companies. Therefore, this study intends to examine the impact
of SR on CFP of Listed Companies in Sri Lanka. Return on Assets (ROA), Return on
Equity (ROE) and Net Profit Margin (NPM) are used as dependent variables to
measure the CFP whilst Economic Performance Disclosure Index (ECN),
Environmental Performance Disclosure Index (ENV) and Social Performance
Disclosure Index (SOC) are used as independent variables to measure the level of
Global Reporting Initiative (GRI) based SR. This study considers the companies listed
on Colombo Stock Exchange (CSE) for the period from 2016 to 2019 and uses
secondary data gathered from the annual reports of these companies. The data is
analysed by means of descriptive statistics, correlation analysis and regression
analysis using the software E Views 8. The results of the Pooled OLS model regression
analysis show that ENV and SOC have significant negative impact on ROA, while
ECN has insignificant impact on ROA. Further, ECN and ENV have an insignificant
impact on ROE. However, SOC have significant impact on ROE. Similarly, ECN, ENV
and SOC also have a significant impact on NPM at 5% significance level. Based on
the correlation analysis, the results show that only SOC have significant negative
relationship with ROA and NPM at 5% significance level. The findings of the study
have an important implication for the management of the companies and other
interested parties. Further researches can be extended by choosing more time periods
of data and choosing other indicators of CFP.
