Sustainability Reporting Based On Gri Standards And Corporate Financial Performance: A Study On Selected Listed Companies In Sri Lanka

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.