Do companies benefit from publishing sustainability-integrated reports? Evidence from the United Arab Emirates

Abstract

Purpose

The purpose of this paper is to assess the extent of narrative disclosure in the sustainability-integrated reports of listed companies in the UAE and its effect of firm’ performances. In 2020, The Securities and Commodities Authority issued a circular requiring all public joint stock companies listed on the Abu Dhabi Securities Exchange (ADX) or the Dubai Financial Market (DFM) to publish a sustainability report as part of their set of Integrated Reports.

Design/methodology/approach

Using all publicly available sustainability integrated reports of listed companies in DFM and ADX over the period 2018–2022, we first gather the report’s content by compiling a list of words using a computational linguistic technique that aims to identify specific characteristics of sustainability reports. Then, we use a GLS model to study the effect of the sustainability reporting on firm financial performance and risk.

Findings

The paper findings shows the level of sustainability disclosure of observed firms is noticeable. Besides, sustainability reporting has a significant effect on firm’s operational performance (ROA), financial performance (ROE) and market performance (Tobin’s Q). Nevertheless; it does not affect the financial risk.

Research limitations/implications

Our study makes many contributions to the literature on corporate reporting. First, our analysis complements research that largely focuses on the financial disclosures in corporate reports by examining the sustainability-specific information and providing a full review of sustainability narratives. Second, by examining the effect of sustainability reports on shareholders' wealth, this article contributes to the current knowledge of sustainability reporting.

Practical implications

Our research offers several practical implications to policymakers, management, shareholders in different ways. The outcomes of this study helps policymakers to assess the effect of the Securities and Commodities Authority circular on the extent of sustainability related information disclosed in the integrated-report. It also helps the government to understand the level of environmental, social and governance (ESG) disclosure per sectors. Besides, this research findings give insight to managers to understand the effect of ESG disclosed information in the sustainability integrated report on firm financial and market performances. In addition, the paper findings assure shareholders of the positive impact on sustainability integrated-report on firm performance.

Originality/value

To the best of the authors’ knowledge, no research has yet looked at the narratives of sustainability reports in the UAE context taking into account the different important aspects of these reports and its impact on firm performance and risk.

Citation

Grassa, R., ElHout, R., Rafiee, R., Hassan, O.Y. and AL Suwaidi, S.H. (2024), "Do companies benefit from publishing sustainability-integrated reports? Evidence from the United Arab Emirates", Management & Sustainability: An Arab Review, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/MSAR-05-2024-0032