ENVIRONMENTAL CAPITAL DISCLOSURE AND FIRM VALUE: DOES ENTITY BUSINESS MODEL MATTER? EVIDENCE FROM LISTED COMPANIES IN KENYA AND SOUTH AFRICA

Abstract

Valuation of listed companies in the Nairobi Securities Exchange (NSE) has been found to be unpredictable as market-to-book values disclose huge variations. Corporate disclosures have been linked to firm value by prior studies. However, assessment of non-financial information disclosures with financial information in an integrated reporting context has not been explored Page 242 Licensed under Creative Common International Journal of Economics, Commerce and Management, United Kingdom fully. Further, owing to the reported mixed results in other settings, this comparative study aimed at evaluating the effect of environmental capital disclosure on value of listed companies in Kenya and South Africa, by interrogating the role of company business model. 137 companies were sampled from a population of 209 companies constituting 19 and 118 companies listed on Kenya and South Africa securities exchanges respectively. A 3-year period 2018-2020 was covered by the study. Ingrained on the stakeholder and legitimacy theories, the study applied both exploratory and confirmatory research design. Secondary data sources encompassing audited annual integrated reports and financial statements were used. Data analysis methods composed of descriptive statistics, correlation and step-wise regression analysis technique. The study demonstrated that environmental capital disclosure positively and significantly influences firm value in both countries. Further, environmental capital disclosure and firm value is mediated by the business model. However, inconsistent and partial mediation was reported for Kenya and South African data respectively. The study recommends continued disclosures related to environmental capital due to its positive influence on firm value. Further, while adopting non financial disclosures, entity business model should be considered since it provides a framework through which non-financial resources affect firm value.