Environmental reporting and financial performance: the role of board independence

Raihan Sobhan, Md. Masud Rana Shohan and Syed Irfan Uddin

Journal of Accounting & Organizational Change, 2025, vol. 22, issue 1, 149-171

Abstract: PurposeThe study aims to investigate the association between environmental reporting (ER) and firm performance and whether board independence plays any role in this relationship in the context of Bangladesh, an emerging economy.Design/methodology/approachThe study has used a sample of 289 firm-years derived from the listed manufacturing companies of Bangladesh for the years 2018–2023. To measure ER, content analysis has been performed. Financial performance has been calculated using both accounting-based (ROA, ROE and EPS) and market-based (Tobin’s Q) performance measures. Two-step system generalized method of moments method has been used to test the hypotheses.FindingsThe study has found a very low level of ER practice by the sample firms. The regression results show a positive and significant impact of ER on both accounting-based and market-based performance measures. In addition, existence of greater board independence is found to positively affect this relationship between ER and performance.Practical implicationsThe findings of the study emphasize the importance of ER in improving performance which will have significant implications for the practitioners. Besides, the importance of greater board independence in enhancing the capability of ER to improve performance will provide valuable insights to the policymakers and regulators.Originality/valueTo the best of the authors’ knowledge, this is the first study to investigate the role of an effective corporate mechanism, board independence, in improving the relationship between ER and performance in the context of an environmentally sensitive country such as Bangladesh.

Keywords: Environmental reporting; Financial performance; Board independence; Bangladesh; Environmental accounting and reporting (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jaocpp:jaoc-05-2024-0149

DOI: 10.1108/JAOC-05-2024-0149

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