Moderating Effect of Financial Strength on the Relationship Between Board Characteristics and Environmental Sustainability Disclosures

Paul Gichuki King’ori, Isaac Kiprotich Naibei, Hellen Wothaya Sang, Andrew Kibet Kipkosgei


The study examines the moderating effect of financial strength on the relationship between board characteristics (board independence and qualification) and ecological sustainability disclosures on firms listed at the Nairobi Securities Exchange. The study period was (5) years (from 2013 to 2017). It employed a correlational survey research design covering the period of five (5) years (2013 - 2017). The target population was sixty-five (65) firms listed at the NSE, with a sample size of 56 firms. Data was utilised from firms’ annual reports, stand-alone reports, and website. Pearson’s correlation, Ordinary Least Square regression model and Environmental Disclosure Index were used in analysis. The results showed that financial strength strengthen the relationship between environmental sustainability disclosure and board independence (β = .23, ρ<.01). A negative and significant moderating effect of financial strength on the relationship between board meetings and environmental sustainability disclosure (β = -.16, ρ<.05) was found. For the board qualification, positive and insignificant effect of financial strength was observed (β = .13, ρ>.05). The study concluded that financial strength has significant moderating effect on the relationship between board characteristics and environmental sustainability disclosure. It recommends enactment of policies addressing corporate environmental reporting by firms as a result of different asset base. Future studies need to focus on; specific dimensions such as directors’ experience, age, and nationality, use of more measures of firms financial strength such as risk analysis, cross listing and profitability.

Keywords: Corporate characteristics, environmental sustainability disclosures, financial strength, listed firms, trinity theory.

DOI: 10.7176/RJFA/10-18-13

Publication date:September 30th 2019

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