The Moderating Role of Financial Constraints in the Influence of Environmental Sustainability Reporting on the Stock Returns of Firms Listed on the Tehran Stock Exchange

Leila Torki


Research objective: stock return demonstrates the efficiency of a firm in creating net interests for the shareholders in return for their investment in firm stocks and is influenced by various factors. The present study seeks to investigate the impact of environmental sustainability reporting on stock returns considering the moderating role of financial constraints.

Methods: The study has been conducted using data from firms listed in Tehran Stock Exchange selected through purposive sampling over 2012-2019. The present study is applied in terms of the research objective, and multiple regression has been used for data analysis. The Kaplan and Zingales (1997) model has been used to estimate financial constraints in this study, given the current practice in previous domestic and foreign research.

Results: Results of the study indicated that environmental sustainability reporting had a significant and positive influence on the stock returns of firms listed on the Tehran Stock Exchange. Besides, results demonstrated that financial constraint played a negative moderating role in the relationship between environmental sustainability reporting and the stock returns of firms listed in the Tehran Stock Exchange.

Conclusion: according to the results, firms’ attention to environmental issues, respecting social rights, and reporting their performance to the community will lead to social support and organizational legitimacy for the firms and will result in them acting successfully in the achievement of the goals desired by the shareholders which are increased stock returns. On the other hand, the presence of financial constraints in the firm acts as an obstacle in this regard and delays the expected return on stocks.

Contribution: the present study is the first to investigate the moderating role of finical constraints in the influence of environmental sustainability reporting on the stock returns of firms listed on the Tehran Stock Exchange.