The Effect of Sustainability Reporting on Earnings Quality: Evidence from Non-Mediterranean Africa

Earnings quality is of significant interest to multiple stakeholders while sustainability reporting has been tipped as an apt ethical communication reflecting the firm’s commitment towards resolution of sustainability concerns. The work sets out to produce empirical evidence from Non-Mediterranean Africa on the effect of sustainability reporting on earnings quality. The research design is ex-post facto while data was extracted from the published financial statement and sustainability reports or integrated reports of 10 quoted companies spanning natural resources, health care, oil and gas, consumer goods and industrial goods from Nigeria, Kenya and South Africa (2011 - 2020). Panel data regression was employed to analyze the data. The study found that sustainability reporting significantly impacted earnings persistence but did not have a significant effect on accruals' quality and value relevance. Not only that, control variables exhibited positive associations with value relevance, even though these relationships lacked statistical significance. Leverage was linked to better accruals' quality and value relevance, although the effect was not statistically significant. The study recommended that firms should step up their compliance level with the globally accepted requirements of sustainability reporting in the best interests of investors, regulators and multinational organizations. Keywords: Sustainability Reporting, Earnings Quality, Legitimacy Theory