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

Afifa Arshi, Amjad Ali and Marc Audi
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Afifa Arshi: Lahore School of Accountancy and Finance, University of Lahore, Pakistan
Amjad Ali: Lahore School of Accountancy and Finance, University of Lahore, Pakistan
Marc Audi: Abu Dhabi School of Management, Abu Dhabi, United Arab Emirates

Bulletin of Business and Economics (BBE), 2025, vol. 14, issue 2, 42-54

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.

Keywords: Sustainability Reporting; ESG Performance; Financial Performance; Firm Size (search for similar items in EconPapers)
Date: 2025
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