The main objective of this research is aimed at investigating this theme by analyzing Environmental Social and Governance (ESG) issues communicated in corporate reports of a sample that is made up of worldwide large size listed companies operating in the Oil & Gas industry. The ESG data refer to various types of non-financial information (such as carbon emissions, waste disposal, supply chain, human rights, community relations, executive compensation, shareholders’ rights, etc.) and may provide a useful support for risk assessment as part of the operational decisions of the company, to support policies related to compliance with the Human Rights and to guide decisions about the structures of corporate governance. Our analysis focuses on a sample of European large size listed companies belonging to the Oil & Gas industry. This choice could be intriguing, as Oil & Gas is a well-known environmental sensitive sector and there is a call to assess the current state of sustainability reporting in response to a strong need of disclosure from different stakeholders in order to legitimize business activities of the Oil & Gas industry. The data collection covers the period 2010-2014 and follows by authoritative secondary sources (ASSET4 Thomson Reuters and Bankscope Bureau van Dijk). A wide range of stakeholders, especially investors and financial analysts, believe that the ESG factors may exert a positive impact on company performance. Drawing upon the stakeholder theory, embedding the level of sustainability practices into companies may influence financial performance positively. Given these theoretical concepts, this study aims to investigate the relationship between the disclosure of non-financial information and firms’ performance. The findings of some regression models through panel data demonstrated that a “combined” approach in non-financial information disclosure has a positive effect on selected accounting-measured variables, such as EBIDTA margin, ROA, ROCE, etc. or on market variables, such as earnings per share, etc.. This approach ensues from the implementation of the GRI guidelines (GRI, 2013; 2014) and actions of “green management” measured by an environmental score. This paper may contribute to the existing literature, because most of empirical researches focused just on environmental information, but there is a strong pressure to investigate the linkage between non-financial information and firm performance. Moreover, there are several practical/managerial implications arising from the analysis of ESG information with clear benefits for investors, financial analysts and corporate executives.
Bianchi Martini, S., Corvino, A., Doni, F. (2016). An empirical analysis on the linkage between sustainability reporting and firm performance in the European Oil & Gas industry. In Financial Reporting and Business Communication, Twentieth Annual Conference.
An empirical analysis on the linkage between sustainability reporting and firm performance in the European Oil & Gas industry
DONI, FEDERICA
2016
Abstract
The main objective of this research is aimed at investigating this theme by analyzing Environmental Social and Governance (ESG) issues communicated in corporate reports of a sample that is made up of worldwide large size listed companies operating in the Oil & Gas industry. The ESG data refer to various types of non-financial information (such as carbon emissions, waste disposal, supply chain, human rights, community relations, executive compensation, shareholders’ rights, etc.) and may provide a useful support for risk assessment as part of the operational decisions of the company, to support policies related to compliance with the Human Rights and to guide decisions about the structures of corporate governance. Our analysis focuses on a sample of European large size listed companies belonging to the Oil & Gas industry. This choice could be intriguing, as Oil & Gas is a well-known environmental sensitive sector and there is a call to assess the current state of sustainability reporting in response to a strong need of disclosure from different stakeholders in order to legitimize business activities of the Oil & Gas industry. The data collection covers the period 2010-2014 and follows by authoritative secondary sources (ASSET4 Thomson Reuters and Bankscope Bureau van Dijk). A wide range of stakeholders, especially investors and financial analysts, believe that the ESG factors may exert a positive impact on company performance. Drawing upon the stakeholder theory, embedding the level of sustainability practices into companies may influence financial performance positively. Given these theoretical concepts, this study aims to investigate the relationship between the disclosure of non-financial information and firms’ performance. The findings of some regression models through panel data demonstrated that a “combined” approach in non-financial information disclosure has a positive effect on selected accounting-measured variables, such as EBIDTA margin, ROA, ROCE, etc. or on market variables, such as earnings per share, etc.. This approach ensues from the implementation of the GRI guidelines (GRI, 2013; 2014) and actions of “green management” measured by an environmental score. This paper may contribute to the existing literature, because most of empirical researches focused just on environmental information, but there is a strong pressure to investigate the linkage between non-financial information and firm performance. Moreover, there are several practical/managerial implications arising from the analysis of ESG information with clear benefits for investors, financial analysts and corporate executives.
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