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Online Sustainability Reporting and Firm Performance: Lessons Learned from Text Mining

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Listed:
  • Xue Ning

    (Information Systems, Business School, University of Colorado Denver, Larimer St, Denver, CO 80202, USA)

  • Dobin Yim

    (Information Systems, Sellinger School of Business, Loyola University Maryland, 4501 North Charles St, Baltimore, MD 21210, USA)

  • Jiban Khuntia

    (Business School, University of Colorado Denver, Larimer St, Denver, CO 80202, USA)

Abstract

As a corporate social responsibility (CSR) initiative, firms are increasingly disclosing sustainability indicators on online platforms to attract stakeholders’ interests. It is vital to understand what indicators reflect more on a firm’s performance and valuations. This study focuses on deriving value-oriented business intelligence from the voluntary disclosure of sustainability reports. The analysis in this study involves a three-stage approach: (1) Latent Dirichlet allocation (LDA) based topic modeling algorithm to identify and summarize typical contents expressed in various documents, (2) firm’s sustainability maturity modeled as a function of its strategic intent using a latent Markov model (LMM) to estimate the statistical significance and the extent of their relationships, and (3) empirical analysis using random effect linear and non-linear probit models to explore the impact of antecedents and firm performance consequences of three strategic intents. This study highlights using an advanced business analytics approach, specifically with latent Dirichlet allocation (LDA) topic modeling, to codify intangible knowledge embedded in annual sustainability reports to infer a firm’s strategic intent behind voluntary disclosure. In addition, this study aims to analyze the influence of the firm’s sustainability strategic intent on its financial performance. A secondary panel dataset consisting of information on 680 firms in 3 years was constructed by matching the text mined data with information from other sources. Results indicate that, on the one hand, while external stakeholder engagement is the primary motivation behind voluntary disclosure of sustainability reporting, firms are starting to engage internal stakeholders through workforce practices. On the other hand, internal employee-oriented intent has more influence on firm performance than external customer-oriented intent. This study demonstrates a toolset to index firms’ sustainability indicators and evaluates firms’ sustainability practice as an intangible asset and its impact on firms’ financial performance.

Suggested Citation

  • Xue Ning & Dobin Yim & Jiban Khuntia, 2021. "Online Sustainability Reporting and Firm Performance: Lessons Learned from Text Mining," Sustainability, MDPI, vol. 13(3), pages 1-15, January.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:3:p:1069-:d:484155
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    Cited by:

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    2. Xue Ning & Yang Lu & Dobin Yim & Jiban Khuntia, 2023. "Factors Affecting the Usage Intention of Environmental Sustainability Management Tools: Empirical Analysis of Adoption of Greenhouse Gas Protocol Tools by Firms in Two Countries," Sustainability, MDPI, vol. 15(3), pages 1-21, February.
    3. Justyna Woźniak & Katarzyna Pactwa & Mateusz Szczęśniewicz & Dominika Ciapka, 2022. "Declaration of the Sustainable Development Goals of Mining Companies and the Effect of Their Activities in Selected Areas," Sustainability, MDPI, vol. 14(24), pages 1-18, December.
    4. Datu Buyung Agusdinata & Wenjuan Liu & Sinta Sulistyo & Philippe LeBillon & Je'anne Wegner, 2023. "Evaluating sustainability impacts of critical mineral extractions: Integration of life cycle sustainability assessment and SDGs frameworks," Journal of Industrial Ecology, Yale University, vol. 27(3), pages 746-759, June.
    5. John Musau & Isabella Mapelu & Antoneta Kariru Njeri, 2024. "Perspectives of Urban Hotel Managers and Guests on Environmental, Social, and Economic Sustainability Practices," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(3s), pages 1521-1538, March.
    6. Iman Harymawan & Fajar Kristanto Gautama Putra & Bayu Arie Fianto & Wan Adibah Wan Ismail, 2021. "Financially Distressed Firms: Environmental, Social, and Governance Reporting in Indonesia," Sustainability, MDPI, vol. 13(18), pages 1-18, September.
    7. Mandas, Marco & Lahmar, Oumaima & Piras, Luca & De Lisa, Riccardo, 2023. "ESG in the financial industry: What matters for rating analysts?," Research in International Business and Finance, Elsevier, vol. 66(C).

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