Disclosure of Environmental Practices and Firm Performance: A Study on Food, Beverage and Tobacco Companies Listed in Sri Lanka

Disclosure of environmental practices is getting prominence in this era of emerging world to both accounting academics and to the accountancy profession. It helps the organizations to get financial returns as a result of involving in these environmental related activities. Therefore, this study intends to examine the impact of Environmental Performance Disclosure (EPD) on Firm Performance (FP) of Food, Beverage and Tobacco Companies Listed in Sri Lanka. Return on Assets (ROA), Return on Equity (ROE), Return on Capital Employed (ROCE) and Tobin’s Q (TOQ) are used as dependent variables to measure the FP whilst Environmental Performance Disclosure Index (EPD) is used as independent variable to measure the level of Global Reporting Initiative (GRI) based EPD. This study considers the companies listed on Colombo Stock Exchange (CSE) for the period from 2016 to 2019 and uses secondary data gathered from the annual reports of these companies. The data is analysed by means of descriptive statistics, correlation analysis and regression analysis using the software E Views 8. The results of the Pooled OLS model regression analysis show that EPD has a significant negative impact on ROA, ROE and ROCE while it has insignificant impact on TOQ. 23.4% of observed variability in the ROA is explained by the variance in EPD. 23.2% of observed variability in the ROE is explained by the variance in EPD while 14.2% of variability in ROCE is explained by the variance in EPD. Similarly, based on the correlation analysis, the results show that EPD has significant negative relationship with ROA, ROE and ROCE at 5% significance level as the p values (0.0029, 0.0031 and 0.0191) are lower than the significance level 0.05 (p values<0.05) and an insignificant relationship with TOQ. The correlation coefficient values indicate that there is a moderate negative relationship exists between EPD and those variables ROA, ROE and ROCE as the r values are -0.509, -0.507 and -0.412 respectively. The findings of this study have an important consequence to the management of the companies and other stakeholders. Future researches can be extended by choosing more time periods and other industry groups’ companies.