AN EMPIRICAL EXAMINATION OF THE MARKET RETURNS AND FINANCIAL PERFORMANCE OF ENTITIES ENGAGED IN SUSTAINABILITY REPORTING

This study analyses, in the Australian context, the relationship between sustainability disclosure and two important aspects of firm performance and survival: abnormal returns and financial performance. The results indicate a generally negative relationship between sustainability disclosure and abnormal returns over all periods examined in the analysis. The introduction of control variables, such as firm size, a range of financial variables, stock return volatility and industry background, generally did not have a major affect on these results. A strong statistical relationship is found between sustainability disclosure and various financial performance indicators. The incidence of sustainability disclosure is positively associated with firms' levels of: operating cashflow to total assets, working capital to total assets, retained earnings to total assets, asset backing per share, debt servicing capacity and capital expenditure relative to assets. The incidence of disclosure is also negatively associated with firms' levels of cash resources to total assets and price to book value ratios.