Institutional environment and environmental, social and governance accounting among banks in West Africa

Purpose This study investigated the influence of institutional environment on the environmental, social and governance (ESG) accounting practices of banks in West Africa. The purpose of this study is to examine whether the size of an economy and the governance structure of a country is relevant for ESG accounting practice. Design/methodology/approach The study applied content analysis on 602 annual reports of 67 banks in 5 countries in West Africa. A generalised method of moments (GMM) estimation technique was used for the regression analysis. Findings The evidence showed that GDP has a positive and insignificant relationship with ESG reporting, suggesting that the size of an economy is not relevant for ESG accounting. The study further found that Corruption Perception Index has a positive and significant relationship with ESG accounting. This result implies that a country's political environment is germane for ESG accounting. Firm-specific factors, such as firms' size, value and age have positive and significant relationships with ESG accounting while net profit margin and leverage have negative relationships with ESG accounting. The study concludes that a country's institutional environment influences the ESG accounting practices of its firms. Practical implications The governments of countries in West Africa must lay an enabling political and economic foundation to improve the accounting practices of firms, which is a critical factor for attracting investments. Originality/value The study contributes to the ESG accounting literature in developing countries which is found to be scarce.