Accounting for sustainability: The influence of green accounting practices on firm performance in Ghana's manufacturing sector

Abstract

Purpose: This study explores the impact of green accounting practices on the financial performance of listed manufacturing firms in Ghana, focusing specifically on return on capital employed (ROCE), return on assets (ROA), and dividend per share (DPS). Anchored in
stakeholder and legitimacy theories, the study provides empirical evidence from an emerging economy perspective, where sustainability practices are increasingly gaining attention but remain underexamined.

Methodology: A quantitative, longitudinal research design was employed, using panel data from one hundred and sixty (160) annual financial reports of eight (8) purposively selected manufacturing firms listed on the Ghana Stock Exchange. A linear panel regression analysis was conducted to evaluate the association between green accounting practices and selected financial performance indicators: ROCE, ROA and DPS.

Findings: The findings reveal a statistically significant positive relationship between green accounting and ROCE, suggesting that environmentally responsible practices may enhance capital efficiency. However, green accounting exhibited no significant influence on ROA and DPS. While a positive association was observed between green accounting and both ROCE and ROA, a negative relationship was noted with DPS, indicating potential trade-offs in shareholder payouts.

Implications: The study underscores the strategic value of green accounting in enhancing operational efficiency and long-term value creation. It recommends that manufacturing firms especially, prioritize environmental accounting as part of their core strategy. To promote environmental accountability and sustainable growth, policymakers and local accounting and regulatory bodies like the Institute of Chartered Accountants, Ghana (ICAG) should institutionalize mandatory green reporting and integrate it as a prerequisite for listing on the Ghana Stock Exchange.

Originality: The study contributes novel insights into the financial implications of green accounting within the context of Sub-Saharan Africa. For instance, by bridging the gap between environmental responsibility and firm performance in an emerging market, the paper provides fresh empirical grounding for advancing sustainability discourse in accounting and finance literature.