SUSTAINABILITY REPORTING AND THE FINANCIAL PERFORMANCE OF BANKS IN AFRICA

Year 2022, Volume: 11 Issue: 1, 43 - 57, 30.03.2022

Edward Attah-botchwey Michael Gift Soku David Mensah Awadzıe

https://doi.org/10.17261/Pressacademia.2022.1551

Abstract

Purpose– This study examined the relationship between sustainability reporting and bank performance in Africa. Unlike previous studies that
solely dwelled on accounting measures of performance, this study adopted both accounting (i.e., return on assets) and market-based
measures of firm performance (i.e., Tobin's Q).
Methodology– The study relied on secondary data gathered from the audited financial statements of listed banks in Africa over ten years
from 2010 to 2020. Notably, the financial statements of 20 listed banks (drawn from Ghana, Nigeria, and South Africa) were subjected to
quantitative content analysis to quantify the extent of sustainability content. It was guided by the sustainability reporting framework
developed by the global reporting initiative. The content analysis aims to identify and classify the extent to which firms report on Economic,
governance, social, and environmental dimensions of sustainability. Besides, the financial statement figures aided the computation of a
performance measure (return on assets and Tobin's Q) for the banks. Concerning data analysis, the study utilized a panel fixed effect
regression model to estimate the relationship between sustainability reporting and firm performance.
Findings– The results suggest that economic, social, and governance reporting of sustainability content (in the financial statement) has a
significant positive association with Tobin's Q and Return on Assets (ROA). Furthermore, the study's findings suggest that banks ' reportage
of environmental sustainability content has a significant positive effect on ROA. However, it has no significant effect on Tobin's Q.
Conclusion– Generally, the study concludes that increased sustainability reporting enhances bank performance in the long term. Among
others, the study recommends that policymakers develop a sustainability framework specific to the banking industry's needs.

Keywords

Sustainability, return on assets, bank performance, framework

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