The Impact of Sustainability Accounting on Financial Reporting Quality: Evidence from the Pharmaceutical and Chemical Sectors on the ASE

Abstract

. This study examines the influence of sustainability accounting, specifically its environmental, economic, and social dimensions, on the quality of financial reports in the pharmaceutical and chemical firms listed on the ASE. The research aims to address the gap in understanding the relationship between sustainability accounting and financial reporting quality in these industries. Using a sample of 27 firms selected from a population of 53, the financial reports and statements from 2016 to 2021 are analyzed as the primary research data source. Statistical methods, including simple and multiple regression models, are employed to test hypotheses and derive results. The findings demonstrate a significant positive impact of sustainability accounting activities on the financial reporting quality of the studied firms. Increasing the reporting of sustainability dimensions enhances the quality of financial reports. The practical implications suggest supporting ASE-listed firms in adopting sustainability accounting initiatives, such as the Fourth-Generation reporting, and revising the listing and disclosure instructions on the ASE to include sustainability accounting as a requirement for disclosure and listing, following the Global Reporting Initiative (GRIG4) guidelines. This study contributes to theory and practice by supplying empirical evidence of the positive relationship between sustainability accounting and financial reporting quality in the pharmaceutical and chemical sectors, emphasizing the importance of integrating sustainability dimensions into reporting practices.