The Relationship between Corporate Sustainability Disclosure and Firm Financial Performance in Johannesburg Stock Exchange (JSE) Listed Mining Companies
Round 1
Reviewer 1 Report
Review Report: The relationship between corporate sustainability disclosure and firm financial performance in Johannesburg Stock Exchange (JSE) listed mining companies
1. Summary
The main purpose of the study is to investigate the relationship between corporate environmental as well as social disclosure and return on investment among selected JSE listed mining companies. The paper is based on the hand collected data of the 11 mining companies listed on Johannesburg Stock Exchange and the data was extracted from sustainability reports for a period of 5 years from 2010 to 2014. A multi-regression analysis was used to analyse the relationship between environmental as well as social disclosure and return on investment. The authors document that there is a negative relationship between environmental disclosure and return on investment. On the other hand, there is a positive association between social disclosure and return on investment.
2. Main Comments and Suggestions
I consider that the idea is interesting and worth doing research. The research topic is correctly explained as concerns its necessity and it fills a gap in the existing literature. However, I have several comments concerning the manuscript.
My general comment is that I have the perception that this is a work in progress, because you did not follow Sustainability guidelines. There are some mistakes that I listed in third section of this review. I suggest to consider the full paper for submission and not the draft paper. Thus, I recommend to stick with the Sustainability guidelines in relation to layout and numbering of sections, subsections and references.
The paper must better justify its position on CSR as a public means to private ends. Currently research on CSR in management and sociology more generally suggests that the prevailing emphasis on the business case for CSR is inconsistent with the fundamental aims of attending to social responsibilities. We know that relationships between CSR and FP are inconclusive, and so any further research in this area (such as this paper) must do at least two things very clearly (which this paper does not):
• justify and state the overall ethical standpoint that understanding the financial profitability of CSR initiatives is and should be more important than understanding their social benefit.
• acknowledge and show an understanding of the potential consequences of prioritising the most profitable CSR initiatives over those that might more clearly better society.
I consider that the paper is well organized and presents a reasonable knowledge of the literature. However, I suggest to correctly number the subsections as it is suggested in Sustainability guidelines. Moreover, in the introduction there is nothing about contribution of the research and the justification why you focus on this setting from South Africa. Why mining companies? Further, in my view you should add separate part (after introduction) explaining why mining companies in South Africa were chosen for this research. Why this context is so different from the context in other countries where the relation between CSR and FP has been examined. This could increase understanding for foreign readers who might not know this crucial context. Please consider also change of the third section title on: Data, Variables and Empirical Models as it better corresponds with the content.
In addition, current research indicates that the relation between CSR and FP is not linear but U-shaped or inversely U shaped. You must add discussion in this matter.
It is customary that if you aiming to publish in Journal X you should include references from this journal to increase its importance in the academic discussion. This version of manuscript lacks crucial references from Sustainability Journal. This should be solved by adding several crucial items. For example:
Fijałkowska, J., Zyznarska-Dworczak, B. and Garsztka, P. (2018), “Corporate Social-Environmental Performance versus Financial Performance of Banks in Central and Eastern European Countries”, Sustainability, Vol. 10 No. 3, p. 772.
Moreover, in terms of discussion about the shape of the relation between CSR and FP there should be added also the following items:
Matuszak, Ł. and Różańska, E. (2019), “A Non-Linear and Disaggregated Approach to Studying the Impact of CSR on Accounting Profitability. Evidence from the Polish Banking Industry”, Sustainability, Vol. 11 No. 1, p. 183.
Nollet, J., Filis, G. and Mitrokostas, E. (2016), “Corporate social responsibility and financial performance. A non-linear and disaggregated approach”, Economic Modelling, Vol. 52, pp. 400–407.
In my view, the hypotheses do not correspond with the literature review where the impact is from CSR on FP. The relationships formulated in hypotheses are opposite.
The discussion about the measures of financial performance can be improved. You have chosen ROI but you did not justify your choice. This could be solved by adding references indicating that accounting-based measures are better comparing to market-based measures in examining this kind of relation in the light of stakeholder theory. Below I include reference hint.
Grewatsch, S. and Kleindienst, I. (2017), “When Does It Pay to be Good? Moderators and Mediators in the Corporate Sustainability–Corporate Financial Performance Relationship: A Critical Review”, Journal of Business Ethics, Vol. 145 No. 2, pp. 383–416.
The study reported in this paper seems to be carefully conducted. The methodology is generally correctly explained and appropriately tailored to the research. The methodological framework is valid for the research topic and explained, in particular for the data sourcing, the variables measurement and its validity. However, I was confused by the expression revenue turnover (line 440) taken as control variable. According to explanation (lines 445-446) it is rather sales growth than revenue turnover. Moreover, the explanation of the relationships between control variables and dependent variable should be stated more clearly (you do not examine relationships between CSR and control variables). Further I was little bit confused because of the number of companies in your sample. In sampling section, you indicate population of 87 companies and then say about sampling frame of 10 companies. In Table 1 line 483 you indicate 50 observations. I suggest to explain it more precisely allowing replicability.
In addition, in majority research CSR variable is lagged one or two years. The logic behind this is obvious. Why you did not lag CSR variables? Possibly you should do this.
Try to be consistent in naming and using the names of variables. In line 440 Revenue turnover, line 463 in model: sales turnover. Is it the same?
The results are presented clearly. However, please implement multicollinearity testing and present the VIF values for variables in Table 1. Moreover, in Table 3 please add R-squared and Adjusted R-squared and F-test for each model. Further, it is customary to add stars ”*” to each coefficient indicating levels of significance. So please include this item in Tables 3 and 4.
The results are presented and discussed clearly. There is nothing about robustness check. This part should be added to the revised version of the manuscript. At least there should be changed measures of financial performance (for example ROA, ROE).
The paper makes useful implications for the practice. The authors present several recommendations. However, the authors do not discuss enough their contribution to this study. It is essential to include the contribution in the literature. How well does the work advance our knowledge of the subject? What is a unique feature of this study? Does this study differ from previous studies?
I suggest that the paper is subject to a thorough, professional proofread to aid clarity and raise the prose to the highest standards of formal academic English.
3. Minor Comments and Suggestions
I have also several specific comments.
line 11 the not ten
line 18 revealeojjiyud ???
line 303 and 401: should be reaserchers
line 438: not sales growth but revenue turnover
Thank you for such an interesting article.
Author Response
Reviewer 1
No | Academic Editor Notes | Lines /Comments |
1 | Sustainability guidelines in relation to layout and numbering of sections, subsections and references. | Resolved |
2 | The paper must better justify its position on CSR as a public means to private ends. Currently research on CSR in management and sociology more generally suggests that the prevailing emphasis on the business case for CSR is inconsistent with the fundamental aims of attending to social responsibilities. We know that relationships between CSR and FP are inconclusive, and so any further research in this area (such as this paper) must do at least two things very clearly (which this paper does not): | Resolved |
3 | Moreover, in the introduction there is nothing about contribution of the research and the justification why you focus on this setting from South Africa. Why mining companies? | Resolved |
4 | In addition, current research indicates that the relation between CSR and FP is not linear but U-shaped or inversely U shaped. | Resolved |
No | Academic Editor Notes | Lines /Comments |
5 | In my view, the hypotheses do not correspond with the literature review where the impact is from CSR on FP. The relationships formulated in hypotheses are opposite. | Resolved |
6 | The discussion about the measures of financial performance can be improved. You have chosen ROI but you did not justify your choice. | Resolved |
7 | The study reported in this paper seems to be carefully conducted. The methodology is generally correctly explained and appropriately tailored to the research. The methodological framework is valid for the research topic and explained, in particular for the data sourcing, the variables measurement and its validity. | Sales growth was used |
8 | In addition, in majority research CSR variable is lagged one or two years. The logic behind this is obvious. Why you did not lag CSR variables? Possibly you should do this | The purpose of the study was not to find a dynamic model. |
9 | Try to be consistent in naming and using the names of variables. In line 440 Revenue turnover, line 463 in model: sales turnover. Is it the same? | Resolved |
10 | The results are presented clearly. However, please implement multicollinearity testing and present the VIF values for variables in Table 1. | If the correlation is greater than 0.95 the multi-collinearity is present (Iyoha,2004). VIF also checked the same thing |
11 | Moreover, in Table 3 please add R-squared and Adjusted R-squared and F-test for each model. Further, it is customary to add stars ”*” to each coefficient indicating levels of significance. So please include this item in Tables 3 and 4. | Presented in table 3 and 4 |
12 | The results are presented and discussed clearly. There is nothing about robustness check. This part should be added to the revised version of the manuscript. At least there should be changed measures of financial performance (for example ROA, ROE). | There is no need to change the variable |
13 | The paper makes useful implications for the practice. The authors present several recommendations. However, the authors do not discuss enough their contribution to this study. It is essential to include the contribution in the literature. How well does the work advance our knowledge of the subject? What is a unique feature of this study? Does this study differ from previous studies? | Resolved |
Author Response File: 
Author Response.pdf
Reviewer 2 Report
The paper introduces a discussion on how corporate sustainability disclosure can impact on the company’s profitability, focusing on both the environmental and social aspects of sustainability. Accordingly an investigation concerning mining companies is carried out to verify the proposed research hypotheses.
Given that the paper was not formatted in accordance with the MDPI standards, also other limitations emerged.
First of all, the Authors should better address the problem they want to investigate, i.e. the motivations related to both environmental and social concerns in terms of return on investments are not equally discussed. In fact, in the introduction the latter issue (social aspects related to HIV/AIDS) is poorly justified.
Accordingly, in section 2 the theoretical framework should be organized in more systematic manner. For instance, the provision of one or more tables depicting and classifying the various aspects the Authors deal with, would help the reader in better understanding the background analysis carried out.
Accordingly, in section 3 the role of the parameters considered for the analysis (line 463-464) should be introduced in a more systematic way, providing detailed information on their evaluation ranges.
This will allow the reader to better appreciate the results provided in section 4, where diagrams summarizing the values in the different tables could highlight the analysis outputs in a more effective manner.
Section 5 should be more focused on the results achieved in the present study, and similarly the practical findings/recommendations provided in the conclusions.
The language needs to be reviewed as well.
Author Response
Number | Academic Editor Notes | Lines /Comments |
1 | First of all, the Authors should better address the problem they want to investigate, i.e. the motivations related to both environmental and social concerns in terms of return on investments are not equally discussed. In fact, in the introduction the latter issue (social aspects related to HIV/AIDS) is poorly justified. | resolved |
2 | Accordingly, in section 2 the theoretical framework should be organized in more systematic manner. For instance, the provision of one or more tables depicting and classifying the various aspects the Authors deal with, would help the reader in better understanding the background analysis carried out | resolved |
3 | Accordingly, in section 3 the role of the parameters considered for the analysis (line 463-464) should be introduced in a more systematic way, providing detailed information on their evaluation ranges. | resolved |
4 | This will allow the reader to better appreciate the results provided in section 4, where diagrams summarizing the values in the different tables could highlight the analysis outputs in a more effective manner. | resolved |
Author Response File: Author Response.pdf
Round 2
Reviewer 1 Report
Review Report 2: The relationship between corporate sustainability disclosure and firm financial performance in Johannesburg Stock Exchange (JSE) listed mining companies
Main Comments and Suggestions
General comment: It is customary to indicate in-text lines where authors amended revised manuscript according to reviewers’ suggestions. Moreover, if English editing is suggested it is also good to indicate these changes too. MDPI suggests usually to use track changes mode in Word processor.
The layout is still not amended to Sustainability Journal requirements.
In introduction there is nothing about contribution. Moreover, research purpose is not align with the research (not CSR but social and environmental). According to discussion section (line 571 and 607) there are two objectives not one… so authors must decide one or two objectives…
Section 2. In my view, if disclosing CSR information is mandatory in mining companies this in fact puts into question relying on stakeholder theory in theoretical background. This should be explained and justified in text. Stakeholder theory as well as legitimacy theory explain why companies disclose additional information voluntarily.
Line 466 "Prior studies used this ratio as a proxy for financial risk level in corporate sustainability disclosure" Is sales growth is a measure of financial risk? It is not clear. Please add table presenting how each variable was computed.
Line 474: discussion is in section 5...
Line 512: do not use expressions table above or table under... you do not know where it will be located in the final version. It should be table 1, 2, 3… Moreover, you have added subsection 4.1 and in first sentence you relate to table from previous section...
Lines: 532-533 How you can state that: "This shows that environmental disclosure has a good impact on ROI" if Edy is negatively associated with ROI? Have you read the paper before submission?
Lines: 542-543: You should add that the relation is positive however insignificant (it could be also negative).
Lines 604-607 and 568-571 Discussion section should not be split on two parts starting with the same sentences. Discussion section should be coherent. In this form it is not.
Lines: 681-687 If this is your contribution (changing measures of variables) it MUST be much more well supported by literature indicating why it is better comparing to previous measures. This what you have added (lines 92-98) is not well supported. Your contribution should be included in introduction section.
Moreover, I have several comments to authors answers:
Point 2: not resolved. In lines: 99-103:
I could not find in text part covering this issue mentioned in my review. If it is in lines 99-103 it not adequate respond to my suggestions. Why it is important to focus on relation between CSR and FP with the expectation that CSR should lead to increase in FP and not just lead to social benefits?
In terms of your contribution (lines: 92-98) Moreover, why mining companies should have concern in this specific issue (HIV/AIDS) and not just focusing on medical care (why you have chosen HIV/AIDS disclosure as a proxy of social and not relay on medical care only)? Why those who are focused on FP should be aware of HIV /AIDS addicted? Have you examined whether in your setting (mining companies) creating shareholders’ value in the long run is no longer a practice? In this version of manuscript, it is not supported by literature review.
Point 3: not resolved. Still in the introduction there is nothing about contribution of the research
Point 6. Not resolved. The discussion about the measures of financial performance can be improved. You have mentioned about KLD for instance in conclusion section!
Point 8. Not resolved. This explanation and discussion should be added in the text.
Point 12. Not resolved. Still there is nothing about robustness test!
Author Response
Reviewer 1: (Round 2)
Main Comments and Suggestions | Lines/Comments |
In introduction there is nothing about contribution. Moreover, research purpose is not align with the research (not CSR but social and environmental). According to discussion section (line 571 and 607) there are two objectives not one… so authors must decide one or two objectives… | Included |
Section 2. In my view, if disclosing CSR information is mandatory in mining companies this in fact puts into question relying on stakeholder theory in theoretical background. This should be explained and justified in text. Stakeholder theory as well as legitimacy theory explains why companies disclose additional information voluntarily. | Legitimacy Theory included |
Line 466 "Prior studies used this ratio as a proxy for financial risk level in corporate sustainability disclosure" Is sales growth is a measure of financial risk? It is not clear. Please add table presenting how each variable was computed. | Included |
Line 512: do not use expressions table above or table under... you do not know where it will be located in the final version. It should be table 1, 2, 3… Moreover, you have added subsection 4.1 and in first sentence you relate to table from previous section.. | Resolved |
Lines: 532-533 How you can state that: "This shows that environmental disclosure has a good impact on ROI" if Edy is negatively associated with ROI? Have you read the paper before submission? | Resolved |
Lines: 542-543: You should add that the relation is positive however insignificant (it could be also negative) | Resolved |
Lines 604-607 and 568-571 Discussion section should not be split on two parts starting with the same sentences. Discussion section should be coherent. In this form it is not. | Resolved |
Lines: 681-687 If this is your contribution (changing measures of variables) it MUST be much more well supported by literature indicating why it is better comparing to previous measures. This what you have added (lines 92-98) is not well supported. Your contribution should be included in introduction section. | Resolved |
Point 2: not resolved. In lines: 99-103: I could not find in text part covering this issue mentioned in my review. If it is in lines 99-103 it not adequate respond to my suggestions. Why it is important to focus on relation between CSR and FP with the expectation that CSR should lead to increase in FP and not just lead to social benefits? |
Included |
In terms of your contribution (lines: 92-98) Moreover, why mining companies should have concern in this specific issue (HIV/AIDS) and not just focusing on medical care (why you have chosen HIV/AIDS disclosure as a proxy of social and not relay on medical care only)? Why those who are focused on FP should be aware of HIV /AIDS addicted? Have you examined whether in your setting (mining companies) creating shareholders’ value in the long run is no longer a practice? In this version of manuscript, it is not supported by literature review. | Included |
Point 3: not resolved. Still in the introduction there is nothing about contribution of the research | Included |
Point 6. Not resolved. The discussion about the measures of financial performance can be improved. You have mentioned about KLD for instance in conclusion section! | Included |
Point 8. Not resolved. This explanation and discussion should be added in the text. | Included |
Point 12. Not resolved. Still there is nothing about robustness test! | We could not do robust test due to limited resources to collect data and pay statistician to run our data. |
Author Response File: Author Response.pdf
Reviewer 2 Report
The Authors have augmented the scientific soundness and quality of the manuscript significantly.
However, a couple of issues still need to be addressed in order to consider it for publication:
1. The foundation of the empirical model should be better explained (lines 440-446).
2. The contents of section 2 are unclear. Does it present the stakeholder theory only? A more systematic subdivision of the sections is needed.
Author Response
Reviewer 2: (Round 2)
Main Comments and Suggestions | Lines/Comments |
The foundation of the empirical model should be better explained (lines 440-446). | Resolved |
The contents of section 2 are unclear. Does it present the stakeholder theory only? A more systematic subdivision of the sections is needed. | Legitimacy Theory was incorporated as well. |
Author Response File: Author Response.pdf
Round 3
Reviewer 1 Report
Review Report 3: The relationship between corporate sustainability disclosure and firm financial performance in Johannesburg Stock Exchange (JSE) listed mining companies
General comment: It is customary to indicate in-text lines where authors amended revised manuscript according to reviewers’ suggestions. Moreover, if English editing is suggested it is also good to indicate these changes too. MDPI suggests usually to use track changes mode in Word processor.
In abstract you say: “This implies that an increase in corporate reporting of environmental and social issues results in heightened financial performance (through an increase in return on investment).” This is not true in the light of your results.
Still the contribution of the paper is weakly supported by literature review. Saying that we do something differently than in previous research is not enough in my view. I leave it for Editor’s decision.
Moreover, several suggestions were not addressed for example point 2 and point 12 in previous review version. I leave it for Editor’s decision.
Author Response
No | Comments | Comments |
1 | General comment: It is customary to indicate in-text lines where authors amended revised manuscript according to reviewers’ suggestions. Moreover, if English editing is suggested it is also good to indicate these changes too. MDPI suggests usually to use track changes mode in Word processor | Edited for English language |
2 | In abstract you say: “This implies that an increase in corporate reporting of environmental and social issues results in heightened financial performance (through an increase in return on investment).” This is not true in the light of your results.
| Resolved |
3 | Still the contribution of the paper is weakly supported by literature review. Saying that we do something differently than in previous research is not enough in my view. I leave it for Editor’s decision.
| Unresolved |
4 | Moreover, several suggestions were not addressed for example point 2 and point 12 in previous review version. I leave it for Editor’s decision.
| Unresolved |
Author Response File: Author Response.pdf
Reviewer 2 Report
Although the quality of the paper has been augmented, still some minor corrections are needed especially for what concerns both the language and style of the manuscript.
Author Response
No | Reviewer's Comment | Comments |
1 | Although the quality of the paper has been augmented, still some minor corrections are needed especially for what concerns both the language and style of the manuscript | Edited for English language |
Author Response File: Author Response.pdf
