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Performance relevance of environmental and social disclosures: The role of foreign ownership

Neha Saini (Faculty of Management Studies, University of Delhi, New Delhi, India)
Monica Singhania (Faculty of Management Studies, University of Delhi, New Delhi, India)

Benchmarking: An International Journal

ISSN: 1463-5771

Article publication date: 31 May 2019

Issue publication date: 31 July 2019




The purpose of this paper is to establish the relationship between environmental‒social disclosure scores and corporate financial performance. The authors tried to investigate the relevance of assurance practice (whether or not companies’ assessment policies are subject to individual assessment for the given period) and value relevance in foreign-owned firms.


This research is based on accounting-based valuation model proposed by Berthelot et al. (2003), considering the market value of equity as the function of book value and other financial indicators including Return of Assets and Return on Capital Employed. Environmental and social disclosure scores are extracted from Bloomberg database as the measure of company’s transparency in reporting value relevance information and sustainable development. The study considers the sample period of 8 years (2008‒15) and uses static (fixed effects and random effects) and dynamic (generalised methods of moments (GMM)) panel data estimations for analysing and concluding results.


The results support the evidence of environmental disclosure score as performance relevance indicator. Environmental disclosure score highlights the positive and significant relationship with different performance indicators. The interaction between foreign ownership and environmental disclosure represents a negative association, implying that foreign ownership is incubating more on profit making rather than environmental protection initiatives. However, in the context of the social disclosure score, a positive association with economic performance is found. But interaction term between foreign ownership and social disclosure represented a negative coefficient.


Value relevance disclosures are investigated with performance indicators that create an incentive for stakeholders. Also, the effect of foreign ownership and value relevance interaction term on firm’s financial performance is determined. To the best of authors’ understanding, previous literature is silent about this dimension. The authors also tried to incorporate the solution to the endogeneity issue by using GMM.



Saini, N. and Singhania, M. (2019), "Performance relevance of environmental and social disclosures: The role of foreign ownership", Benchmarking: An International Journal, Vol. 26 No. 6, pp. 1845-1873.



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