FINANCIAL PERFORMANCE AND SUSTAINABILITY TRANSPARENCY: LOGISTIC AND BAYESIAN ANALYSIS OF ESG REPORTING

CROCNAN ANDREEA-ROXANA
, Doctoral School of Economics and Business Administration West University of Timisoara Timisoara, Romania
ORCID: 0009-0004-5005-5226
Email: andreea.crocnan99@e-uvt.ro

DOI: https://doi.org/10.24818/cike2025.16

Pages: 136–141

📄 Download PDF

Abstract

Abstract: Amid tightening regulatory frameworks, exemplified by the EU Corporate Sustainability Reporting Directive (CSRD), understanding the determinants of Environmental, Social, and Governance (ESG) disclosure has become a critical concern for both scholars and practitioners. This paper explores the interplay between ESG reporting practices and financial performance in a sample of 300 Italian-owned firms operating in Romania over the period 2012–2022. A novel dataset was developed by integrating information from the Bureau van Dijk Orbis database with publicly available corporate reports, providing an original empirical basis for this study. Financial performance was distilled using Principal Component Analysis (PCA), while ESG disclosure was specified as a binary dependent variable. The analysis employed logistic and probit regression models, supplemented with Bayesian estimation techniques to ensure robustness.

Results reveal a U-shaped relationship between firm performance and the likelihood of ESG reporting: both underperforming and highly profitable companies are more inclined to disclose sustainability information, either as a legitimacy mechanism or as a reputational signaling strategy. Additionally, group-level ESG commitments, firm size, and sectoral risk exposure emerges as significant predictors of disclosure behavior. This research contributes to the literature by offering rare insights into an understudied Eastern European context, with implications for multinational corporate governance and sustainability policy design. Future investigations should extend this framework to dynamic modeling and incorporate qualitative evidence to better understand the motivations behind ESG transparency.

Keywords: ESG reporting, financial performance, logistic regression, PCA

JEL Classification: M14, G30, Q56, C38

References

    1. Barney, J., 1991. Firm resources and sustained competitive advantage. Journal of Management, 17(1), pp.99–120.
    2. Buallay, A., 2019. Is sustainability reporting (ESG) associated with performance? Evidence from the European banking sector. Management of Environmental Quality, 30(1), pp.98–115.
    3. Clarkson, P.M., Li, Y., Richardson, G.D. and Vasvari, F.P., 2008. Revisiting the relation between environmental performance and environmental disclosure: An empirical analysis. Accounting, Organizations and Society, 33(4–5), pp.303–327.
    4. DiMaggio, P.J. and Powell, W.W., 1983. The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), pp.147–160.
    5. Elkington, J., 1997. Cannibals with forks: The triple bottom line of 21st century business. Oxford: Capstone.
    6. Giannarakis, G., Konteos, G. and Zafeiriou, E., 2021. Non-linear relationship between ESG performance and financial performance: Evidence from global firms. Journal of Cleaner Production, 290, 125138.
    7. Hahn, R. and Kühnen, M., 2013. Determinants of sustainability reporting: A review of results, trends, theory, and opportunities in an expanding field of research. Journal of Cleaner Production, 59, pp.5–21.
    8. Ioannou, I. and Serafeim, G., 2017. The consequences of mandatory corporate sustainability reporting. Harvard Business School Research Paper, No. 11–100.
    9. Jolliffe, I.T. and Cadima, J., 2016. Principal component analysis: A review and recent developments. Philosophical Transactions of the Royal Society A, 374(2065), 20150202.
    10. Nekhili, M., Nagati, H., Chtioui, T. and Rebolledo, C., 2017. Corporate social responsibility disclosure and market value: Family versus nonfamily firms. Journal of Business Research, 77, pp.41–52.
    11. Spence, M., 1973. Job market signaling. Quarterly Journal of Economics, 87(3), pp.355–374.
    12. Suchman, M.C., 1995. Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20(3), pp.571–610.
    13. Wooldridge, J.M., 2010. Econometric analysis of cross section and panel data. 2nd ed. Cambridge, MA: MIT Press.
    14. Bureau van Dijk, 2023. Orbis Database. [online] Bureau van Dijk – A Moody’s Analytics Company. Available at: https://www.bvdinfo.com/en-gb/our-products/data/orbis [Accessed 15 June 2025].
    15. StataCorp LLC, 2021. Stata Statistical Software: Release 17. College Station, TX: StataCorp LLC.
Scroll to Top