Sustainability Reporting and Financial Performance for Listed Commercial Banks on Nairobi Securities Exchange, Kenya
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Date
2024-06
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Kenyatta University
Abstract
The growing demand for transparency in environmental, social, and economic aspects has led global businesses to adopt sustainability reporting as a vital tool for measuring and improving their performance towards sustainable development. However, the impact of sustainability reporting on financial returns varies significantly among companies, with some experiencing positive outcomes while others show no discernible effect. Despite its importance, there is a noticeable gap in research specifically examining how sustainability reporting influences the financial performance of banks listed on the Nairobi Securities Exchange (NSE). This study aimed to investigate the influence of sustainability reporting on the financial performance of 11 commercial banks listed on the NSE as of December 2022. The specific objectives included assessing the impact of sustainability reporting on the environmental, social, and economic dimensions of financial performance, guided by the theoretical frameworks of agency theory, stakeholder theory, positive accounting theory and signalling theory. A descriptive exploratory research design was employed, focusing on the 11 NSE-listed banks with a total of 23,534 employees. The population was categorized into secretarial, clerical, supervisory, and management strata using stratified random sampling. Primary data was collected through structured questionnaires, complemented by secondary data gathered through data collection instruments. The collected data underwent rigorous coding, entry, cleaning, and analysis using SPSS version 28. Descriptive statistics, such as mean, percentages, and frequencies, provided a summary of the sample data, while inferential techniques like correlation and regression were used for deeper analysis beyond the sample. To ensure construct validity, the questionnaire was evaluated against the study's conceptual framework, including factor analysis. Reliability was assessed using Cronbach's alpha, given the interval scale of most questionnaire items. Ethical considerations were prioritized throughout the study, with measures taken to protect the confidentiality and integrity of collected data from unauthorized access and misuse. The findings revealed that sustainability reporting has a significant influence on the financial performance of NSE-listed banks, with environmental responsibility emerging as the most influential factor, followed by social and economic responsibilities. Banks that prioritize sustainable practices are well-positioned to achieve improved financial outcomes. These results provide valuable insights for policymakers, bank executives, and investors, highlighting the importance of integrating comprehensive sustainability strategies to enhance economic performance. This study contributes to academic discourse by advancing our understanding of the relationship between sustainability reporting and financial performance in the banking sector. It highlights the critical role of sustainable practices and recommends future research to expand this understanding across diverse banks and economic sectors, thereby fostering comprehensive insights into sustainable development efforts.
Description
A Project Study Presented to Kenyatta University School of Business, Economics and Toursim in Part Fulfillment of the Criteria for the Award of the Degree of Master of Business Administration, June 2024.
Supervisor
Waweru Fredrick