The Impact of Environmental Sustainability Disclosure on Stock Return of Saudi Listed Firms: The Moderating Role of Financial Constraints

Abdulaziz Mohammed Alsahlawi, Kaouther Chebbi and Mohammed Abdullah Ammer
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Abdulaziz Mohammed Alsahlawi: Department of Finance, School of Business, King Faisal University, Al-Ahsa 31982, Saudi Arabia
Kaouther Chebbi: Department of Finance, School of Business, King Faisal University, Al-Ahsa 31982, Saudi Arabia
Mohammed Abdullah Ammer: Department of Finance, School of Business, King Faisal University, Al-Ahsa 31982, Saudi Arabia

IJFS, 2021, vol. 9, issue 1, 1-17

Abstract: Environmental sustainability represents nowadays a significant factor for business sector. Firms carry out many initiatives to develop environmental practices. Investors increasingly consider environmental discloser by firms and integrate this disclosure into the investment decision-making process. Using a database of Saudi listed firms, this study adds to the literature by examining the relationship between the environmental sustainability disclosure and stock return and whether this relationship is moderated by the financial constraints. We find that the environmental sustainability disclosure has significant and negative impact on stock return, indicating that investors do not consider environmental disclosure when valuing the stocks. Furthermore, our results propose that the negative impact of environmental disclosure on stock return is more evident in firms with financial constraints. This study provides managerial implications for regulatory authorities, firms and investors. The environmental practices can be value relevant. However, these practices need to be efficiently integrated into stock valuation.

Keywords: stock return; environmental sustainability disclosure; financial constraints; Saudi Arabia (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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