Sustainability Development, Corporate Governance, and Financial Performance: the Moderating Role of Audit Quality

Abstract

Purpose: The study investigates the effect of non-financial reporting, including sustainable development reports (SUS) and corporate governance reports (CG), on the financial performance (FP) of listed firms on the Vietnamese stock market. Simultaneously, investigate the moderating influence of audit quality on the aforementioned relationships in the context of Vietnam.
Design/methodology/approach: The content analysis method is utilized to encode SUS and CG information for 83 non-bank listed firms with the highest market capitalization on HOSE between 2019 and 2023. The FEM regression estimation technique is utilized in conjunction with reliability testing via FGLS estimation.
Findings: The disclosure of SUS and CG information has an impact on FP (ROA, ROE, and Tobin's Q), though in distinct directions. FP is positively impacted by SUS information dissemination and negatively by CG information disclosure. Audit quality plays a twofold moderating impact in the above correlations.
Originality/value: The study provides empirical evidence on the impact of non-financial reporting on financial performance, as measured in both accounting-based and market-based terms. It also reinforces stakeholder and agency theories, proposing improvements in report quality and the auditing role in corporate governance.