Analysing the Role of Non-traditional Financial Disclosures in Enhancing Corporate Sustainability of High-risk Sectors in Iraq
Faraj Gheni Abbood
*
Department of Accounting, Middle Technical University, (MTU), Baghdad, Iraq.
Baydaa Fadhil Jasim
Department of Accounting, Middle Technical University, (MTU), Baghdad, Iraq.
Mustafa Salih Dakhil
Al-Furat Al-Awsat Technical University, (ATU), Kufa, Iraq and Ural Federal University, Yekaterinburg, 620002, Russia.
*Author to whom correspondence should be addressed.
Abstract
Corporate sustainability has emerged as a significant concern for businesses operating in high-risk sectors, particularly in economies facing political instability, economic volatility, and regulatory uncertainties. This study examined the impact of non- traditional financial disclosures, specifically environmental, social, and governance (ESG) disclosures, on corporate sustainability within high-risk sectors in Iraq. Corporate sustainability was assessed using return on assets (ROA) and return on equity (ROE). The study employed ex-post facto research design, as it relied on existing data that was not subject to modification. It focused on a population of 15 selected listed companies from high-risk sectors in Iraq, namely banking, oil and gas, and construction. A purposive sampling method was adopted to select the firms. The research covered the period from 2013 to 2024. To analyze the relationships between the variables, variance-weighted least-squares regression analysis was applied. The findings revealed that non- traditional financial disclosures had a negative and statistically significant effect on the firm’s financial performance. An increase in ESG reporting was associated with a decline in ROA and ROE, suggesting that in unstable environments, the financial and operational burdens of non-financial disclosure may outweigh its short-term benefits. The study concluded that while non-financial disclosures are globally promoted as mechanisms to enhance corporate accountability and long-term sustainability, in high-risk sectors of Iraq, they appear to undermine short-term financial performance. This suggested that companies in the high-risk sectors should adopt a phased and strategic approach to ESG disclosure, focusing first on areas that align closely with their core business objectives and available resources.
Keywords: Corporate sustainability, non-traditional financial disclosures, environmental disclosure, social disclosure, governance disclosure, return on assets, return on equity