Location
Hilton Hawaiian Village, Honolulu, Hawaii
Event Website
https://hicss.hawaii.edu/
Start Date
3-1-2024 12:00 AM
End Date
6-1-2024 12:00 AM
Description
Sustainability reporting has emerged as an increasingly important topic since the trend linking financial and non-financial performance in the capital market attracted great attention in recent years. This study employs Natural Language Processing (NLP) to investigate three characteristics of sustainability reports including major component topics, readability, and sentiments of words used. Findings from the NLP analysis are regressed against corporate financial performance measures to examine the relation between sustainability report characteristics and firm performance. Results show that specific thematic topics of sustainability reports relate to different financial performance indicators. For instance, community-related disclosures have a positive relation with Return on Assets (ROA) and with Market Value (MV), methodology-related topics have a positive relation with MV, resource-related topics have a negative relation with MV, and governance and climate-related topics both have a positive relation with the Zmijewski score (ZJS), suggesting that these factors contribute to a firm’s financial viability.
Recommended Citation
Lui, Gladie; Chia, Jeremy; and Shum, Connie, "Impact of Sustainability Disclosures on Financial Performance: A Natural Language Processing Perspective" (2024). Hawaii International Conference on System Sciences 2024 (HICSS-57). 5.
https://aisel.aisnet.org/hicss-57/da/big_data_and_analytics/5
Impact of Sustainability Disclosures on Financial Performance: A Natural Language Processing Perspective
Hilton Hawaiian Village, Honolulu, Hawaii
Sustainability reporting has emerged as an increasingly important topic since the trend linking financial and non-financial performance in the capital market attracted great attention in recent years. This study employs Natural Language Processing (NLP) to investigate three characteristics of sustainability reports including major component topics, readability, and sentiments of words used. Findings from the NLP analysis are regressed against corporate financial performance measures to examine the relation between sustainability report characteristics and firm performance. Results show that specific thematic topics of sustainability reports relate to different financial performance indicators. For instance, community-related disclosures have a positive relation with Return on Assets (ROA) and with Market Value (MV), methodology-related topics have a positive relation with MV, resource-related topics have a negative relation with MV, and governance and climate-related topics both have a positive relation with the Zmijewski score (ZJS), suggesting that these factors contribute to a firm’s financial viability.
https://aisel.aisnet.org/hicss-57/da/big_data_and_analytics/5