IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/127480.html

Evaluating the Impact of Sustainability Reporting on Financial Performance: The Mediating Role of ESG Performance and the Moderating Role of Firm Size

Author

Listed:
  • Arshi, Afifa
  • Ali, Amjad
  • Audi, Marc

Abstract

As sustainability assumes a more prominent position in corporate strategic planning, this research investigates the influence of sustainability reporting on the financial outcomes of companies listed on the Pakistan Stock Exchange, considering environmental, social, and governance performance and firm size as explanatory factors. With the increased international focus on ESG disclosures, the study fulfills the lack of empirical research in developing economies, such as Pakistan. The research design is a quantitative one, as primary data will be collected using a structured questionnaire that is closed-ended and will be administered to 400 employees working in different sectors in Pakistan. They were investigated in four dimensions: sustainability reporting, ESG performance, financial performance, and firm size. The SPSS was applied to conduct data analysis, including descriptive statistics, correlation, and reliability tests, as well as mediation and moderation regression models. Instructed by the resource-based view and the stakeholder theory, the study highlights the importance of strong ESG strategies in creating a competitive advantage over time and increasing financial performance. The evidence indicates that there is a positive association between the overall sustainability reporting and financial performance that is conditioned by the size of firms and mediated by ESG performance. The research has some practical implications for the business, encouraging them to adopt harmonized ESG disclosure standards, and capacity-building efforts should be offered to smaller companies to enhance their integration of sustainability. Policy-wise, the study requires policy measures in the form of regulations that would help in achieving uniformity in ESG practices among companies. Cross-sectional data nature and using self-reported responses as the data are the limitations, as they can present a bias of response. Altogether, the current research contributes to the scholarly discussion and provides practical conclusions about the development of sustainable business in emerging economies.

Suggested Citation

  • Arshi, Afifa & Ali, Amjad & Audi, Marc, 2025. "Evaluating the Impact of Sustainability Reporting on Financial Performance: The Mediating Role of ESG Performance and the Moderating Role of Firm Size," MPRA Paper 127480, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:127480
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/127480/1/MPRA_paper_127480.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Fatemi, Ali & Glaum, Martin & Kaiser, Stefanie, 2018. "ESG performance and firm value: The moderating role of disclosure," Global Finance Journal, Elsevier, vol. 38(C), pages 45-64.
    2. Marc Audi & Marc Poulin & Amjad Ali, 2024. "Environmental Impact of Business Freedom and Renewable Energy: A Global Perspective," International Journal of Energy Economics and Policy, Econjournals, vol. 14(3), pages 672-683, May.
    3. Fatemi, Ali & Fooladi, Iraj & Tehranian, Hassan, 2015. "Valuation effects of corporate social responsibility," Journal of Banking & Finance, Elsevier, vol. 59(C), pages 182-192.
    4. Guangfan Sun & Changwei Guo & Bin Li & Honglei Li, 2023. "Cultural inclusivity and corporate social responsibility in China," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 10(1), pages 1-12, December.
    5. Audi, Marc & Ahmad, Muhammad Bilal & Ahmad, Khalil & Poulin, Marc & Ali, Amjad, 2025. "Different Dimensions of Globalization and CO2 Emission Nexus: Application of Environmental Kuznets Curve for Worldwide Perspective," MPRA Paper 124294, University Library of Munich, Germany.
    6. Nazim Hussain & Ugo Rigoni & René P. Orij, 2018. "Corporate Governance and Sustainability Performance: Analysis of Triple Bottom Line Performance," Journal of Business Ethics, Springer, vol. 149(2), pages 411-432, May.
    7. Marc Audi & Marc Poulin & Khalil Ahmad & Amjad Ali, 2025. "Modeling Disaggregate Globalization to Carbon Emissions in BRICS: A Panel Quantile Regression Analysis," Sustainability, MDPI, vol. 17(6), pages 1-24, March.
    8. Robert G. Eccles & Ioannis Ioannou & George Serafeim, 2014. "The Impact of Corporate Sustainability on Organizational Processes and Performance," Management Science, INFORMS, vol. 60(11), pages 2835-2857, November.
    9. ., 2021. "Impact on corporate governance and enterprise management," Chapters, in: Beyond Shareholder Value, chapter 3, pages 77-102, Edward Elgar Publishing.
    10. Mahfuja Malik, 2015. "Value-Enhancing Capabilities of CSR: A Brief Review of Contemporary Literature," Journal of Business Ethics, Springer, vol. 127(2), pages 419-438, March.
    11. Jordi Surroca & Josep A. Tribó & Sandra Waddock, 2010. "Corporate responsibility and financial performance: the role of intangible resources," Strategic Management Journal, Wiley Blackwell, vol. 31(5), pages 463-490, May.
    12. Sulehri, Fiaz Ahmad & Ali, Amjad, 2024. "Assessing the Pathways of Sustainable Development: A Structural Equation Modeling Investigation of Regulatory Framework, Innovation, and Economic Indicators," MPRA Paper 121286, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Karim, Danish & Ahmad, Khalil & Ali, Amjad, 2025. "Artificial Intelligence and the Evolution of Accounting: Transforming Roles, Skills, and Professional Practices," MPRA Paper 127531, University Library of Munich, Germany.
    2. Khalid, Hassam & Ahmad, Khalil & Ali, Amjad, 2025. "The Impact of Information Technology Audits on Audit Efficiency and Effectiveness: Evidence from UK Firms," MPRA Paper 127542, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:rfh:bbejor:v:14:y:2025:i:2:p:42-54 is not listed on IDEAS
    2. Veeravel, V & Murugesan, Vijaya Prabhagar & Narayanamurthy, Vijayakumar, 2024. "Does ESG disclosure really influence the firm performance? Evidence from India," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 193-202.
    3. Mengdie Hai & Ziwei Fang & Zhaohua Li, 2022. "Does Business Group’s Conscious of Social Responsibility Enhance its Investment Efficiency? Evidence from ESG Disclosure of China’s Listed Companies," Sustainability, MDPI, vol. 14(8), pages 1-18, April.
    4. Eduardo Duque-Grisales & Javier Aguilera-Caracuel, 2021. "Environmental, Social and Governance (ESG) Scores and Financial Performance of Multilatinas: Moderating Effects of Geographic International Diversification and Financial Slack," Journal of Business Ethics, Springer, vol. 168(2), pages 315-334, January.
    5. Maya Finger & Mosi Rosenboim, 2022. "Going ESG: The Economic Value of Adopting an ESG Policy," Sustainability, MDPI, vol. 14(21), pages 1-15, October.
    6. Batool, Aleeza & Ali, Amjad & Audi, Marc, 2025. "Assessing the Impact of Sustainability Initiatives on Greenhouse Gas Emissions in Sweden and Finland," MPRA Paper 127481, University Library of Munich, Germany.
    7. Marina Brogi & Antonella Cappiello & Valentina Lagasio & Fabrizio Santoboni, 2022. "Determinants of insurance companies' environmental, social, and governance awareness," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(5), pages 1357-1369, September.
    8. Jeremy Galbreath, 2018. "Do Boards of Directors Influence Corporate Sustainable Development? An Attention‐Based Analysis," Business Strategy and the Environment, Wiley Blackwell, vol. 27(6), pages 742-756, September.
    9. Zhongtian Li & Jing Jia & Larelle (Ellie) Chapple, 2022. "The corporate sustainability committee and its relation to corporate environmental performance," Meditari Accountancy Research, Emerald Group Publishing Limited, vol. 31(5), pages 1292-1324, July.
    10. Fatemi, Ali & Fooladi, Iraj & Sy, Oumar & Zaman, Ashraf, 2024. "Corporate headquarters relocation and CSR performance," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 622-637.
    11. Christian Espinosa-Méndez & Carlos P. Maquieira & José T. Arias, 2023. "The Impact of ESG Performance on the Value of Family Firms: The Moderating Role of Financial Constraints and Agency Problems," Sustainability, MDPI, vol. 15(7), pages 1-20, April.
    12. Elbardan, Hany & Uyar, Ali & Kuzey, Cemil & Karaman, Abdullah S., 2023. "CSR reporting, assurance, and firm value and risk: The moderating effects of CSR committees and executive compensation," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 53(C).
    13. Amir Gholami & Peter A. Murray & John Sands, 2022. "Environmental, Social, Governance & Financial Performance Disclosure for Large Firms: Is This Different for SME Firms?," Sustainability, MDPI, vol. 14(10), pages 1-21, May.
    14. George H. Ionescu & Daniela Firoiu & Ramona Pîrvu & Marian Enescu & Mihai-Ionuț Rădoi & Teodor Marian Cojocaru, 2020. "The Potential for Innovation and Entrepreneurship in EU Countries in the Context of Sustainable Development," Sustainability, MDPI, vol. 12(18), pages 1-18, September.
    15. Ng, Anthony C. & Rezaee, Zabihollah, 2020. "Business sustainability factors and stock price informativeness," Journal of Corporate Finance, Elsevier, vol. 64(C).
    16. Julien Lachuer & Sami Ben Jabeur, 2022. "Explainable artificial intelligence modeling for corporate social responsibility and financial performance," Journal of Asset Management, Palgrave Macmillan, vol. 23(7), pages 619-630, December.
    17. Fatemi, Ali & Glaum, Martin & Kaiser, Stefanie, 2018. "ESG performance and firm value: The moderating role of disclosure," Global Finance Journal, Elsevier, vol. 38(C), pages 45-64.
    18. Ahmed Mohamed Habib, 2024. "Does real earnings management affect a firm's environmental, social, and governance (ESG), financial performance, and total value? A moderated mediation analysis," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(11), pages 28239-28268, November.
    19. Jaehong Lee & Suyon Kim & Eunsoo Kim, 2021. "Voluntary Disclosure of Carbon Emissions and Sustainable Existence of Firms: With a Focus on Human Resources of Internal Control System," Sustainability, MDPI, vol. 13(17), pages 1-18, September.
    20. Fatemi, Ali & Fooladi, Iraj & Zhao, Yonggan & Ma, Zongming, 2024. "On the superior performance of SRI funds," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 567-581.
    21. Alexandra ZBUCHEA & Florina PÎNZARU, 2017. "Tailoring CSR Strategy to Company Size?," Management Dynamics in the Knowledge Economy, College of Management, National University of Political Studies and Public Administration, vol. 5(3), pages 415-437, September.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:127480. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.