Angulating Social and Environmental Reporting to Firms’ Advantage: A Resource Based View Approach from Ethiopian Companies’ Perspective

Abstract

Aims: To evaluate the strategic role of social and environmental reporting in Ethiopian large tax payer companies based on the resource-based view of the firm. Study Design: The study employed explanatory research design. Place and Duration of Study: Large tax payer companies for the year 2018, Ethiopia. Methodology: The study used annual audited financial reports of 262 companies and structured questionnaire which were distributed to three individuals per each sampled company. Interaction effect model was developed for which ordinary least square (OLS) regression with robust standard errors on a cross-sectional analysis were used to test the hypotheses. Results: The regression result showed that social & environmental reporting and the interaction effect of social & environmental reporting with companies’ environmental sensitivity had significant positive impact on reputability of companies. Conclusion: The study concluded that through social and environmental reporting, companies can develop valuable resource which in turn increase their reputability. Hence, environmental sensitive companies have more operational negative effect to society and environment, they are considered as dangerous by the society. Heretofore, these companies can strategically shift this perception to companies’ advantage through social and environmental reporting. Originality/Value: In the availability of limited studies which explore social and environmental reporting practice within developing country perspective, this study shed some light about the Ethiopian companies reporting practice. Furthermore, the results of this study were an indication for companies’ managers to strategically use social and environmental reporting, which in turn increase their reputability and prevent them from being perceived as dangerous by the society.