THE IMPACT OF THE INTEGRATION BETWEEN SUSTAINABILITY ACCOUNTING AND MEASUREMENTS OF FINANCIAL PERFORMANCE ON FIRM VALUE ( APPLIED STUDY )

Abstract

Sustainability disclosures in Egypt are still relatively a new phenomenon which lead to the limitation of the sample size and the time period chosen for this study . The objective of this research is to investigate firms from various sectors and determine if there is any correlations between the level of corporate sustainability reporting, financial performance and firm value, indicated by its market value. Conclusions are stated as follows : 1- Overall results provide reasonable evidence that, there is a relationship between corporate sustainability reporting when accompanied by a progress in total assets or total equity and corporate financial performance. Statistical results confirm that companies that place an emphasis on sustainability reporting would have higher financial performance that is measured by the return on assets. 2- Results also proove that there is a positive correlation between sustainability reporting and firm value which is measured by Tobin’s Q. The results of this study support the value-enhancing theory, which suggests that a firm’s engagement in SR practices adds a value to that firm. When a firm is involved in social behaviour, the society would perceive the firm much more favourable and therefore the firm would be rewarded with a premium value in the capital markets. Sustainability reports play an important role in enhancing transparency and reducing the information asymmetry between investors and managers. It is considered a significant communication tool in a company. Moreover, the ethical reputation of a firm is regarded as an intangible asset that figures the market price of the firm and rewards the investors in the capital markets. All in all, results of this study show that firms disclosing sustainability information, would enjoy higher firm value .