Sustainability Disclosure, Governance, and Corporate Performance: Evidence from Accounting- and Market-Based Measures

Abstract

Background This study examines the impact of sustainability disclosure — both environmental and social — on the financial performance of listed companies in Bangladesh. With increasing international attention on sustainability reporting, there is little evidence on how the quality of disclosure attributes is associated with corporate financial performance in developing markets with nascent governance systems. The investigation fills three main gaps: (i) lack of deep examination of the effects of environmental and social information separately on economic wealth; (ii) dearth in moderation analysis on governance, industry, and firm size characteristics; and (iii) weak methodology in controlling for endogeneity and contemporaneous error structures in emerging-market observations. Methods Set against a balanced-panel sample of non-financial firm-listed companies on the Dhaka Stock Exchange (2020–2023), financial performance is measured by return on assets, return on equity, Tobin’s Q, and market capitalization growth. The information quality was measured using GRI-based indices. The estimation, which utilizes the fixed effects, CS-ARDL, and system-GMM models, is also robust to heterogeneity and endogeneity. Results The findings indicate that environmental disclosure enhances both accounting- and market-based performance, whereas social disclosure has a partial effect, predominantly driven by labour and community commitments. These effects are strengthened by governance strength and firm size, which support the moderating role of internal structure and market coverage. Conclusions The study also adds value to the literature by combining deconstructed disclosure indices, moderating contexts, second-generation estimators, and stakeholder and legitimacy theories in an emerging market.