Abstract:
Purpose – This study aims to provide a convincing argument behind the mixed findings on the association
between sustainability reporting and firm performance by investigating the possibility of a non-linear
relationship through a threshold model.
Design/methodology/approach – This study used (Hansen’s 1999) threshold framework to investigate
the relationship between firm performance and sustainability reporting using a sample of 210 Bombay Stock
Exchange-listed firms spanning over 10 years from March 2010 to March 2019. This framework helps to test
the threshold effect’s presence, estimate the threshold value and check the authenticity of the estimated
threshold value.
Findings – Sustainability reporting has a differential threshold impact on the different indicators of firm
performance. On the one hand, the authors’ results illustrate that the firms’ operating performance is
positively impacted if and only if the sustainability reporting crosses a certain threshold. On the other hand,
sustainability reporting positively impacts firms’ market performance only up to a cut-off point.
Practical implications – Managers should strive to balance sustainability reporting to reap its desired
benefits on firm performance.
Originality/value – This study explores the possible non-linearity in the association between firm
performance and sustainability reporting and explains the relationship’s inconclusive results. Further, this
study explores the field in the novel emerging economy with unique institutional settings that mandate
spending on sustainability activities.