The Impact of Green Accounting Disclosure on Financial Performance of Public Listed Firms in Malaysia

Objective: The primary objective of this study is to evaluate the impact of green accounting disclosure on the financial performance of publicly listed firms in Malaysia. Theoretical Framework: The theoretical framework of this study is based on Legitimacy Theory, which posits that firms engage in green accounting disclosures to align with societal expectations and enhance their legitimacy. Method: This study employs a panel data analysis method, utilizing both fixed effects and random effects models to assess the impact of green accounting disclosure (GAD) on the financial performance of publicly listed firms in Malaysia. The analysis covers data from 248 firms across 13 sectors, spanning from 2019 to 2023, with key financial performance indicators including return on assets (ROA), return on equity (ROE), and return on sales (ROS), while controlling for firm size, stock performance, leverage, and board size. Results and Discussion: The results indicate that green accounting disclosure (GAD) has a significant negative relationship with return on assets (ROA), suggesting that while companies engage in green disclosures to enhance their legitimacy, it may incur costs that reduce short-term profitability. However, GAD shows no significant impact on return on equity (ROE) and return on sales (ROS). The findings underscore that stock performance and leverage significantly influence the adoption of green disclosures, while firm size and board size were not significant factors. Research Implications: Policymakers and regulatory bodies should recognize that while green accounting disclosures improve corporate legitimacy, their direct impact on financial performance, particularly profitability, may be limited in the short term. Originality/Value: This study offers a unique perspective on the impact of sustainability reporting in a regulatory context, particularly within a developing market like Malaysia.