The Evaluation of the Relationship between the Companies Sustainability Reporting and Their Financial Performance

The purpose of the present research is to assess the impact of ESG reporting on the financial performance of the companies listed on the Bucharest Stock Exchange (BVB). The research methodology has been based both on a qualitative approach used in the analysis of the specialised literature and on the formulation of the research hypotheses and on a statistical analysis, respectively. The primary financial information found in the financial reports of 67 companies listed on the BVB for the period 2020-2022 has been used to determine the financial performance indicators. The ESG information that has been extracted from the sustainability reports, the administrators’ reports, or from the companies' websites has been subjected to scoring procedures in order to design an aggregate ESG disclosure score. Both data sets have been manually collected and statistically processed by using the financial and economic profitability ratios, the earnings per share, and the market added value as dependent variables, whereas the aggregate ESG disclosure score has been used as the independent variable. The findings have shown that an increase in the ESG disclosure of ESGs will lead to an improvement in terms of economic and financial performance. A higher ESG disclosure index score results in higher earnings per share. However, it does not have a significant impact on the increase in the company's market value. Therefore, companies that have integrated sustainability into their business strategy and communicated it effectively have been perceived by investors as better prepared for future risks and opportunities. This perception prompts investors to redirect their funds towards sustainable and socially responsible investments, which, in turn, will contribute to a superior financial performance for these companies