Sustainability disclosure and its impact on telecommunication and information technology sectors' performance: worldwide evidence

Abstract

PurposeThis study investigates the relationship between the level of sustainability disclosure and telecommunication and information technology (IT) sectors' performance (operational, financial and market).Design/methodology/approachUsing data culled from 4,458 observations from 60 different countries for 10 years (2008–2017), an independent variable derived from environmental, social and governance (ESG) score are regressed against dependent manufacture performance indicator variables [return on assets (ROA), return on equity (ROE) and Tobin's Q (TQ)]. Two types of control variables complete the regression analysis in this study: firm-specific and macroeconomic.FindingsThe findings elicited from the empirical results demonstrate that there is a significant negative relationship between ESG and market performance (TQ). However, there is no significant effect of ESG on both operational (ROA) and financial performance (ROE). Moreover, the findings elicited from the partial least square structural equation modeling the relationship between ESG and ROA is stronger in emerging than in developed economies.Practical implicationsThe authors' opinion for policy makers is that it is essential to promote and implement the appropriate legislative framework for sustainability reporting, which should enhance both the sustainability practices as well the profitability of IT firms.Originality/valueThe model in this study presents a valuable analytical framework for exploring sustainability disclosure as a driver of performance in telecommunication and IT sectors' economies. In addition, this study highlights telecommunication and IT sectors' management lacunae manifesting in terms of the weak nexus between each component of ESG and IT sectors' performance.