ANALYZING THE RELATIONSHIP BETWEEN SUSTAINABILITY DISCLOSURE QUALITY ON FINANCIAL PERFORMANCE OF LISTED INDIAN COMPANIES
DOI:
https://doi.org/10.55955/520003Keywords:
Sustainability Disclosure Quality (SDQ), Financial Performance, Return on Assets (ROA)Abstract
Sustainability reporting has become an important tool of over recent years which enables companies to report their environmental, social, and governance (ESG) activities to their stakeholders. The paper discusses how Sustainability Disclosure Quality (SDQ) affects the financial performance of 15 listed Indian companies in three sectors, namely, Manufacturing, Information Technology (IT), and Banking during five years (2019-2023). The structure of Disclosure Quality Index (DQI) was developed with the help of the secondary data (annual reports, Business Responsibility and Sustainability Reports (BRSR), and financial databases) to evaluate the extent of sustainability disclosures. Monetary execution was quantified in accordance with Return on Assets (ROA), Return on Equity (ROE), and Net Profit Margin (NPM). The data were analysed using descriptive statistics and correlation analysis. Findings show that Banking firms are the best disclosure quality (Mean SDQ = 0.785), whereas IT firms have the best financial performance (Mean ROA = 8.96; ROE = 20.84; NPM = 21.45 ). It was found that SDQ is positively correlated with all financial indicators (ROA: r = 0.482, ROE: r = 0.516, NPM: r = 0.604, p < 0.01) which indicates that high-quality sustainability disclosures can be linked to better financial results. The article contributes the increased significance of transparency and ESG practices in improving corporate profitability and trusted by the stakeholders to investors, managers and policymakers.
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