Abstract:
Corporate environmental disclosure entails reporting on the impact of company activities on the natural
environment such as waste management, recycling, carbon management, emission, pollution, wetland and wildlife
conservation. Conventional accounting systems are limiting since they fail to directly address sustainability concerns. They
have failed to address economic growth against social and environmental needs in order to balance the different needs of
various stakeholders. Sustainability has become a major pillar of today’s business activities. This study consequently aimed at
assessing the effect of corporate environmental disclosure on financial performance of listed firms at the Nairobi Securities
Exchange, Kenya. This study made use of longitudinal secondary data from the annual reports and financial statements of
listed companies at the Nairobi Securities Exchange. Content analysis of sampled listed companies’ annual reports was
undertaken to examine environmental disclosure practices. A checklist of environmental disclosure items and categories was
developed and environmental disclosure indices computed. Casual research design was employed to determine the cause-effect
relationship between corporate environmental Disclosure and financial performance. Target population of the study was 61
listed companies. Purposive sampling was employed in selecting firms that have been listed for entire period of study and
whose annual reports are available at the Nairobi Securities Exchange. This resulted into a sample size of 32 listed companies.
Coefficient of Skewness was used to test the normality of data. Homoscedasticity and auto-correlation assumptions of the
regression model were tested using scatter plots and Durbin Watson test. Linear regression model was used to determine the
casual relationship between environmental disclosure and financial performance. The overall model was found to be significant
with F=8.514, P-value ˂0.05. The predictor variable explained 47.7% of changes in financial performance. Firm size and
leverage have no effect on environmental disclosure. Findings reveal that environmental disclosure with P-value ˂0.05 has a
positive significant effect in the mean financial performance. The study recommends that firms should engage in
environmental disclosure because it leads to increased financial performance. The study would be useful to the government and
also managers to ensure policies are put in place to ensure present generations meet their needs without compromising the
ability of future generations to meet theirs. The study also forms basis for further research and adds knowledge to existing
body.
