Sustainability reporting and firm performance insights from a developing country

Abstract

Research purpose: This study examines the impact of sustainability reporting (SR) on firm performance in Vietnam, where SR remains largely voluntary and underdeveloped. It evaluates how disclosure levels, adherence to Global Reporting Initiative (GRI) standards, and alignment with Sustainable Development Goals (SDGs) influence accounting-based (ROA, ROE) and market-based (Tobin’s Q) performance. Research motivation: Although SR is central to global corporate governance, evidence on its link to firm performance remains mixed and largely focused on developed economies. Vietnam’s rapid industrialization and weak institutional frameworks offer a unique context to assess how SR affects financial outcomes and investor perceptions, providing insights into its strategic value in emerging markets. Research design, approach, and method: Grounded in Agency and Stakeholder Theories, the study analyzes panel data from 693 listed firms on the Ho Chi Minh and Hanoi Stock Exchanges (2018–2023) using the Generalized Method of Moments (GMM) to address endogeneity. Main findings: Results show that SR negatively affects ROA and ROE but positively influences Tobin’s Q, indicating short-term financial costs yet long-term market gains. GRI compliance enhances all performance measures, while SDG alignment negatively affects Tobin’s Q. Firm size and board gender diversity improve performance, whereas leverage and agency costs reduce it. Practical/managerial implications: The study underscores SR as a strategic investment that enhances transparency, efficiency, and investor trust. Policymakers should strengthen sustainability frameworks, promote GRI adoption, and support firms, especially in emerging markets, in building sustainable governance practices.