Effects of sustainability performance and sustainabiilty disclosure on investment risk perceptions.

• Main Authors: Chiam, Qing Hui., Tay, Eileen., Yeo, Wei Tsin.
• Other Authors: Mak Wai Yeong
• Format: Final Year Project
• Language: English
• Published: 2012
• Subjects: DRNTU::Business::Accounting::Reporting; DRNTU::Business::Management::Social responsibility
• Online Access: http://hdl.handle.net/10356/48330
• Institution: Nanyang Technological University

Sustainable reporting is an emerging topic of interest among investors, regulators and corporations worldwide. Given that investors progressively incorporate sustainability issues into their investment risk assessment and that this aspect is relatively unexplored in existing literature, this study seeks to examine whether sustainability performance and sustainability disclosure influence investment risk perceptions. We present a 2 x 2 experimental design where 150 nonprofessional investors were asked regarding the risk they perceived from investing in the corporation’s stock, given the hypothetical sustainability reports of the corporation. Results show that stronger sustainability performance is negatively correlated with investment risk perceptions. Furthermore, this study presents evidence of significant interaction effect between sustainability performance and sustainability disclosure when corporate sustainability performance is weak. When corporate disclosures relating to such performance include detailed discussion, investment risk perception is reduced. On the other hand, enhanced disclosure of strong sustainability performance does not have significant implications on investment risk perception. Our findings thus provide insights into how corporations can leverage on varying the levels of sustainability performance and disclosure detail to manage investment risk perception.