The impact of environmental accounting compliance on share prices of listed companies
Background: Sustainable development is the buzzword of the decade, yet developing countries struggle to comply with environmental guidelines. A study was done to determine the possibility of financial gain by means of share price prosperity as a result of compliance with environmental accounting principles. Objective: To investigate the relationship between the commitment to environmental accounting principles and the share price of Main Board listed companies on the Johannesburg Stock Exchange. Design: A quantitative, cross-sectional design with descriptive, explanatory and contextual elements was undertaken. Setting and Sample: An all-inclusive sample of the announcements of the Main Board listed companies of the Johannesburg Stock Exchange between 1 June 2008 and 1 June 2013 was used, as well as a stratified random sample of 32 companies – 16 as listed on the SRI Index and 16 not. Measurements: Data related to compliance with environmental accounting principles were correlated with share price fluctuations of Main Board listed companies. T-tests were done to determine whether a correlation exists between compliance with environmental accounting principles and fluctuations in share price. Results: 56 instances of upward trends and 80 instances of downward trends after one month followed announcements that included compliance to environmental accounting principles (one constant and one unknown). 52 instances of upward trends and 54 instances of downward trends after one year followed these announcements (30 unknown). 48 out of 336 listed companies (14%) announce environmental accounting principle compliance with their shareholders. More announcements referring to environmental accounting compliance were posted in 2012 and 2013 (n = 17 and n = 22 averaged for six months) compared to those in 2008 to 2011 (n = 9; n = 15; n = 14 and n = 15 averaged for six months). 56% of companies complying with environmental accounting principles are from the mining industry. 39.19% of principles complied with was within the diverse principle division. P-values derived from t-tests done to investigate correlations between share price and compliance with environmental accounting principles on various levels all revealed P-values of more than 0.25. Conclusions: No statistically significant correlation could be made between compliance with environmental accounting principles and fluctuations in share price. There is low divulgence of compliance practices to shareholders from mentioned companies. An upward trend for compliance with environmental accounting principles is noted during the past five years. The mining industry showed the greatest compliance with these principles when judged according to divulgence of compliance by means of announcements to their shareholders as well as when judged according to stance on the SRI Index.