Linking ESG Disclosure to Financial Performance: Evidence from Banking Firms Listed at the Nairobi Securities Exchange Plc, Kenya

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Published Nov 10, 2025
https://doi.org/10.70907/7b03ad09
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Vol. 19 No. 11 (2025): Research Beacon Journal

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Mr. Shem Oyugi
Jomo Kenyatta University of Agriculture and Technology (JKUAT)
Dr. Tobias Olweny
a:1:{s:2:"en";s:69:"Jomo Kenyatta University of Agriculture and Technology (JKUAT), Kenya";}
Dr. Douglas Rosana
a:1:{s:2:"en";s:69:"Jomo Kenyatta University of Agriculture and Technology (JKUAT), Kenya";}

Abstract

The study examines whether environmental, social, and governance disclosure is associated with financial performance among banking firms listed at the Nairobi Securities Exchange. Using a causal research design and secondary panel data for 11 banks over 2019–2023, the analysis applied random-effects generalized least squares after confirming classical assumptions, stationarity, and model choice with diagnostic tests and the Hausman procedure. Results show that environmental reporting and social reporting each have a positive and statistically significant relationship with profitability measured by return on equity, while governance reporting is not significant. In the baseline random-effects model, environmental reporting and social reporting are both significant, but governance reporting is not; the model is jointly significant based on the Wald statistic. In a second model that introduces firm size and interaction terms, the overall explanatory power improves, and firm size remains significant while the social reporting coefficient strengthens. Collectively, the findings suggest that investments in environmental and social disclosure align with better financial outcomes in Kenya’s listed banking sector, whereas governance disclosure appears more legitimacy-oriented with limited short-run financial impact. The study recommends that banks deepen environmental and social transparency tied to core operations and that regulators continue standardizing ESG disclosure to enhance comparability and investor decision-making. Future research should extend the horizon and incorporate mixed methods to capture lagged and strategic effects of governance practices.

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Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Author Biography

Mr. Shem Oyugi, Jomo Kenyatta University of Agriculture and Technology (JKUAT)

MSc Finance, Department of Economics, Accounts and Finance

How to Cite
Oyugi, S., Olweny, T., & Rosana, D. (2025). Linking ESG Disclosure to Financial Performance: Evidence from Banking Firms Listed at the Nairobi Securities Exchange Plc, Kenya. Research Beacon, 19(11), 162-180. https://doi.org/10.70907/7b03ad09

How to Cite

Oyugi, S., Olweny, T., & Rosana, D. (2025). Linking ESG Disclosure to Financial Performance: Evidence from Banking Firms Listed at the Nairobi Securities Exchange Plc, Kenya. Research Beacon, 19(11), 162-180. https://doi.org/10.70907/7b03ad09

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