Hong Yuh Ching

Sustainability reports in Brazil through the lens of signaling, legitimacy and stakeholder theories

Purpose - The purpose of this article is to extend the applicability of stakeholder, legitimacy and signaling theories by examining to what extent proactive CSR disclosures are interrelated to attempt to gain and maintain legitimacy, to gain support of the stakeholders and to reduce information asymmetry. Design/methodology/approach - To test the theoretical arguments, a longitudinal approach over a 5-year period of 145 companies’ sustainability reports and statistical analysis were applied to investigate the evolution of their quality. Findings - The results show a significant increase in the quality of sustainability reporting and the gain of experience in writing these reports can contribute to this. Based on signaling and legitimacy theories, we suggest that the improvement in sustainability reporting quality acts as an important signal to gain legitimacy when information asymmetry happens during the legitimacy process. The disclosure for economic and social dimensions is better than environmental and the quality improvement over time was the result of synergies and inter-linkages more between these two dimensions of sustainability, and to a lesser extent of environmental. Practical implications - Firms should view investing in sustainability reporting disclosure as a strategy of obtaining business legitimacy. Originality/value - The results of this paper are of interest for several reasons: 1) extend and broaden the use of signaling in studying its use on sustainability reporting; 2) the use of three theories is an appropriate framework for empirical analysis of sustainability reporting disclosure quality in Brazil; 3) it adds to the scarce evidence of sustainability reporting in Brazil.

The Quality of Sustainability Reports and Corporate Financial Performance: Evidence From Brazilian Listed Companies:

Corporate sustainability is essential to long-term corporate success and for ensuring markets deliver value across society, and despite its importance, there is no clear consensus as to whether the financial performance of companies relates to their sustainability performance. The objectives of this study are to verify whether the sustainability reporting quality would affect corporate financial performance (CFP) among the firms listed on Corporate Sustainability Index (ISE) and to examine the quality of information disclosed in their sustainability reports (SR). The sample is composed of all firms listed on ISE for the period 2008 to 2014. This study considered accounting and market-based indicators and control variables. There is no clear consensus as to whether the financial performance of companies listed in sustainability indices relates to their sustainability performance. The main findings are as follows: There is no association between accounting and market-based variables and the reporting quality, and although the quality disclosure is improving throughout the years studied, the scores are still low. This is also true in the three dimensions of sustainability. We are not aware of studies examining the relationship between CFP and sustainability reporting quality, and this is the main contribution.