Abstract:
As environmental problems are increasingly large and widespread at the local, regional, national, and
global levels, Environmental disclosure plays a very important part to assure competitive advantages
for companies in a world where most investors are getting more and more attracted by green
investments, customers are more and more interested in Eco-friendly products and nations are more
and more concern in setting up environmental regulations. This study examines the relationship
between environmental disclosures with the firms’ financial performance of the listed companies in
Rwanda stock exchange from 2018 to 2022. Based on both causal and exploratory research design, it
aimed at determining the effect of environmental accounting in terms of environmental disclosures to
firm profitability measured as net profit margin, earning per share and return on equity. From a global
perspective, our findings reveal that the nature of environmental disclosure observed among listed
companies in RSE, seems to be rather voluntary than compulsory and even though some firms
disclose not too much environmental information in their annual reports, they disclose in parallel the
same or even more information on their websites, including sustainability and social reports.
Furthermore and as expected manufacturing firms followed by financial institutions disclose more
environmental information (Bralirwa :0.75, Cimerwa : 0.74 and KBC: 0.70). From regression models,
we have found that larger firms operating as manufacturer, listed in RSE for quite a long time and
with a significant board of directors members number are more likely to disclose more environmental
information. Regarding the relationship between environmental disclosure and financial performance
as proxied by Return on equity (ROE), Net profit margin (NPM) and Earnings per share (EPS), the
results indicated that environmental accounting disclosure, by itself and as moderated by industry type
and board size has positive and significant effect on net profit margin. Furthermore, results reveal that
none of the control variables has significant impact on ROE. Environmental accounting disclosure, by
itself and as moderated by, firm size, board size, number of years listed in the PSE, Board size and
financial leverage, has no significant effect on Return on Equity and finally the variables board size ,
the variable EAD itself and moderated by board size affect negatively and significantly Earning per
share.
