Abgineh et al. [3] conducted a study to develop a financial performance model based on ED for firms listed on the Tehran Stock Exchange (TSE). The primary objective of this research was to propose a financial performance model grounded in ED practices within these companies. This study employed a mixed-methods approach; from an objective standpoint, it is applied research, while methodologically, it is descriptive-exploratory and descriptive-correlational. Accordingly, the research was conducted in two phases. In the first phase, by reviewing Persian and English literature and applying a seven-step integrated modeling procedure, the relevant variables for the research model were identified and measured. In the second phase, data were collected from listed companies (445 observations from 89 firms between 2016 and 2020) across polluting industries (automotive and oil sectors) and non-polluting industries (food and pharmaceutical sectors) to examine the relationship between ED and financial performance. The findings indicated a significant relationship between ED and financial performance. Furthermore, the level of industry pollution moderated this relationship. Notably, emphasizing ED, particularly in polluting industries, contributes to value creation and the sustainable development of firms.

Jabbar Abd Ali Al-Atbi et al. [4] examined the impact of restating financial statements on the quality and disclosure of voluntary Corporate Social Responsibility (CSR) activities in 100 companies listed on the Stock Exchange (SE), over the period from 2017 to 2021. To test the research hypotheses, the study utilized both logistic regression and linear regression models. The findings suggest that companies that do not restate their financial statements are more motivated to engage in voluntary CSR reporting activities. This result aligns with signaling theory, indicating that firms with lower agency problems and less information asymmetry are more likely to undertake voluntary CSR reporting actions. Therefore, companies should consider engaging in voluntary CSR activities, not only to gain a competitive advantage and signal their commitment but also to benefit from future performance improvements.

Mohammadi et al. [5] examined the relationship between ED and the financial performance of companies listed on the TSE. The study aimed to investigate how ED affects the financial performance of these listed firms. For this purpose, data from 94 companies listed on the TSE over the period 2009 to 2014 were analyzed. This research employed a descriptive–correlational design, and multivariate linear regression was applied for data analysis. The results revealed variability in the relationship between ED practices and financial performance. Specifically, the study found a significant positive relationship between overall ED and profit margin.

Abgineh et al. [6] examined the relationship between changes in the level of social and ED and profitability indicators using the KLD index. The study aimed to investigate how variations in the disclosure of social and environmental issues affect profitability measures. Employing a quasi-experimental design, the research utilized data extracted from financial statements over the period 2001–2014. To test the hypotheses, multiple regression models were applied within a panel data framework and analyzed using the fixed-effects method. The KLD index was employed to assess the social and environmental responsibility of the firms. The results indicated that changes in the level of social and ED are significantly associated with financial performance dimensions, including the operating profit-to-sales ratio. Furthermore, the findings revealed that variations in social responsibility disclosure are significantly related to both the Return on Equity (ROE) and the return on net assets.

Ghanbari et al. [7], in a study titled “social responsibility, financial performance and institutional ownership reporting”, examined the mediating effect of financial performance on the relationship between CSR and institutional ownership. The study sample consisted of 23 investment companies over the period 2010–2013, analyzed in two stages. In the first stage, the relationship between CSR and financial performance was assessed. In the second stage, the relationship between CSR and institutional ownership was examined, considering the mediating role of financial performance. The results indicated that financial performance significantly mediates the relationship between CSR and institutional ownership.

Mahdavi et al. [8], in a study titled “the relation of firm size, industry type and profitability to social and environmental information disclosure”, investigated the relationship between the level of environmental and social disclosure and certain firm characteristics. An unweighted index was used to measure the level of environmental and social disclosure. The study population comprised companies listed on the TSE, with a sample of 87 firms across various industries for the period 2007–2012. Multivariate regression analysis was employed to test the research hypotheses. The findings indicated a significant positive relationship between firm size and the level of environmental and social disclosure. However, no statistically significant relationship was observed between disclosure levels and profitability. Contrary to the researchers’ expectations, companies operating in sensitive industries exhibited lower levels of environmental and social disclosure compared to firms in non-sensitive industries.

Tanc and Gokoglan [9], in a study titled “the impact of environmental accounting on financial and operational indicators of manufacturing firms”, examined the effect of environmental accounting on financial and operational performance indicators and assessed the positioning of environmental accounting from the perspective of faculty members at the University of Tehran. The study employed Student’s t-test to confirm or reject the proposed hypotheses. Friedman’s test was used to evaluate the relative impact and rank the significance of each factor, while paired t-tests compared expected levels with actual levels. The results demonstrated that environmental accounting significantly affects financial and operational indicators of manufacturing firms, including production volume, reduction in production waste, provision of external technical assistance to other manufacturing firms, types of products produced, and the ratio of long-term debt service (principal and interest repayment) to total liabilities of the firms.

Angelia and Suryaningsih [10], in a study titled “the effect of environmental performance and corporate social responsibility disclosure towards financial performance”, examined theoretical frameworks related to environmental performance, CSR disclosure, and financial performance of firms. Their findings indicate that environmental performance and CSR are now recognized as critical factors in evaluating corporate success. Attention to environmentally and socially aligned processes and products provides significant competitive advantages over comparable firms that rely solely on conventional accounting practices, thereby enhancing market value. Consequently, strong environmental performance and the corresponding fulfillment of CSR responsibilities help mitigate potential risks for firms, facilitating greater investor engagement and, ultimately, improving financial performance. The study further highlights that environmental performance does not exert a direct effect on financial performance; rather, its impact is realized indirectly through the mediating role of CSR disclosure, which enhances corporate financial outcomes.

Lin and Qumrozman [11] examined the impact of ED, financial disclosure quality, and information technology adoption on firm performance, exploring whether CG ensures sustainability. The study aimed to investigate the role of environmental and financial disclosure, Information Technology (IT) adoption, and good governance in corporate sustainability over the period 1990–2019. A sample of 75 registered financial institutions in the Bangladesh capital market was selected to collect relevant data. Secondary data sources, including annual reports of the target financial companies, economic review reports, and central bank publications, were utilized for data compilation. Several econometric techniques were employed to document empirical linkages and the explanatory power of the independent variables on firm performance. Baseline evaluations revealed a positive and significant relationship between corporate sustainability and the explanatory variables. Furthermore, the study extended the empirical assessment using a system-GMM approach, confirming a positive association among financial and ED, IT alignment, good governance, and sustainable firm performance [11].

Su et al. [12] conducted a study to examine the impact of ED on the efficiency of organizational capital allocation and firm performance. This study utilizes econometric modeling and data from highly polluting companies listed on the Chinese stock market between 2013 and 2020 to investigate the impact of ED on capital allocation efficiency and its underlying mechanisms. The results indicate that ED significantly and strongly enhances capital allocation efficiency, with its effect varying based on company size, ownership structure, life cycle, and region. However, employees and creditors serve as negative moderators in this relationship.

Yang et al. [2] conducted a study to examine the impact of the quality of environmental information disclosure on financial performance, with a focus on the moderating effects of internal and external stakeholders. This study analyzes A-share listed companies in the pharmaceutical manufacturing industry in China from 2011 to 2019. The study investigates the impact of environmental information disclosure quality on financial performance, considering the moderating effects of internal and external factors such as environmental regulations, media pressure, and executive compensation. The results indicated that the quality of environmental information disclosure had a negative impact on company performance. This study highlights the difficulty in improving corporate environmental behavior, even under pressure from both internal and external stakeholders, and provides a reference for regulatory authorities to enhance the mechanisms for the quality of environmental information disclosure.

Meng and Zhang [13], in their study, examined the relationship between corporate ED and investor response: evidence from the Chinese capital market. The aim of this paper is to analyze the impact of corporate ED from the perspective of investors. To this end, data on EDs from all listed Chinese companies between 2004 and 2020 were collected, and the impact of annual reports on investor responses was controlled. The findings indicate that listed companies may lack the motivation to engage in environmental management and have little interest in disclosing environmental information. As a result, the government should formulate a mandatory disclosure policy and provide administrative support for environmentally-friendly companies. Gupta and Gupta [14], in their study titled environmental sustainability effects on corporate performance dimensions through sustainability development: an event from India, examined the impact of environmental sustainability on the performance dimensions of 200 businesses in India. The findings from their research revealed that environmental sustainability has a positive and significant impact on all dimensions of business performance, including financial performance, customer performance, learning performance, and internal processes.

Govindan et al. [15], in their study titled a social sustainability assessment framework for the manufacturing industry in India, selected and evaluated social sustainability indicators based on the existing literature, in collaboration with relevant industry experts and specialists specific to their country. To assign weights to the selected indicators, they conducted surveys, and for their evaluation, they developed a mathematical model suitable for the research environment and conditions. The findings revealed that the work environment and working conditions are the primary factors influencing job satisfaction and lead to improved employee performance outcomes.

Prasad et al. [16], in their study titled CSR and environmental sustainability: an event study on energy power as an indicator of environmental sustainability, examined 100 companies listed on the Bombay Stock Exchange (BSE) over a six-year period. Their findings indicated that CSR does not have a significant relationship with energy power.

Chen et al. [17], in their study, examined CSR and earnings smoothing from the supply chain perspective. The results indicate that companies with higher levels of CSR have greater reliance on supplier and buyer relationships and are associated with lower levels of earnings smoothing. Additionally, it shows that the increased demand for CSR within the supply chain aligns with the interests of shareholders and stakeholders. Atan et al. [18], in their study, examined the impact of Environmental, Social, and Governance (ESG) factors on corporate performance using data from 54 publicly listed companies in Malaysia during the period from 2010 to 2013. The results showed that there was no significant relationship between environmental and social factors and the profitability and value of the companies.

Zhao et al. [19] conducted a study on companies operating in highly polluting industries in China between 2008 and 2014 to explore the relationship between CG systems, social responsibility disclosure, and the value of these companies. The results of their study indicated that the level of environmental information disclosure by these companies decreased over the examined period. Additionally, various CG factors were found to influence the disclosure of environmental information. Furthermore, while environmental information disclosure had no immediate impact on corporate profitability, it was found to have beneficial long-term effects.

Kabir and Tai [20] conducted a study to examine whether CG facilitates the relationship between CSR and financial performance. To this end, they analyzed companies listed on the Ho Chi Minh Stock Exchange in Vietnam over the period from 2008 to 2013. The results of this study revealed that companies with higher levels of social and environmental responsibility activities tend to have better financial performance. Additionally, the study found that ownership structure, including foreign and government ownership, as well as larger and more independent boards of directors, positively and significantly influence the relationship between CSR and financial performance.

Silva et al. [21] conducted a descriptive and quantitative study to examine the determinants of ED in Brazilian companies. By analyzing sustainability reports alongside the annual financial statements of 97 firms, the study found that company size, environmental auditing, and global sustainability reporting requirements are significantly associated with the corporate sustainability disclosure index and the extent of disclosure. Furthermore, these factors were linked to stock price, the firm’s pollution intensity, CG structures, Return on Assets (ROA), and ROE.

Liu et al. [22] conducted a study titled “Does family involvement explain why corporate social responsibility affects earnings management?” to examine how family ownership influences the relationship between earnings management and CSR. The study analyzed a sample of 3,378 firm-year observations from S&P 500 companies over the period 2003–2010. The findings indicated that CSR has no significant association with either real or accrual-based earnings management when family ownership is present.

Menon et al. [23] investigated the relationship between CSR and financial performance and found a direct and positive relationship between CSR and financial performance indicators, including ROE, ROA, and Tobin’s Q.

ROAit = β0 + β1EDit + β2SIZEit + β3LEVit + β4AGEit + εi,t (1) ROAit = β0 + β1EDit + β2CGit + (β3EDit ∗ CGit) + β4SIZEit + +β5LEVit + β6AGEit + εi,t (2)

I. ROA: financial performance II. ED: environmental disclosure III. CG: corporate governance IV. Size: firm size V. LEV: financial leverage VI. AG: firm age VII. Constant Term: β0 VIII. Component: εi,t Regression model error IX. β0, β1 variable coefficients

Table 1 presents the central tendency and dispersion measures for the research variables. The data cover an eight-year period from 2016 to 2023 for 112 firms, collected on an annual basis. Among descriptive statistics, the mean is considered the most informative measure for quantitative data, while the standard deviation is preferred for assessing variability. For example, financial performance exhibits a mean, median, and standard deviation of 0.155257, 0.128129, and 0.161425, respectively, indicating that the firms under study achieved an average ROA of approximately 15%, with a variability of ±16% around this mean. The maximum and minimum values are 0.83035 and -0.40446, respectively, reflecting that the most and least successful firms achieved returns on assets of approximately 83% and -40%, respectively.

Before estimating any regression, it is necessary to test the reliability and stationarity of the variables to ensure that the regression is not spurious and that the results are valid. Reliability of the research variables implies that their means and variances remain constant over time, and that the covariances between variables across different years are stable. Consequently, using these variables in the model does not lead to spurious regression. To this end, the study employs the Levin, Lin, and Chu (LLC) test to assess the stationarity of the variables.

As shown in Table 2, all research variables are stationary at the 0% significance level. It can be concluded that all data are reliable (do not contain a unit root), and the stationarity of the data indicates that the regression model estimates in subsequent stages will not be spurious.

As shown in Table 2, all research variables are stationary at the 0% significance level. It can be concluded that all data are reliable (do not contain a unit root), and the stationarity of the data indicates that the regression model estimates in subsequent stages will not be spurious.

Hypothesis 1. ED has a significant effect on financial performance in firms listed on the TSE and IFB. To examine the above hypothesis using the information presented in Table 3, it can be stated that the significance level for ED is 0.000, with a t-statistic of 11.791 and a coefficient of 0.515. Since the p-value is less than 0.05, it can be concluded that there is a direct and statistically significant relationship between ED and financial performance. Therefore, the above hypothesis—namely, “ED has a significant effect on financial performance in firms listed on the TSE and IFB”—is supported at the 95% confidence level. Hypothesis 2. CG moderates the relationship between ED and financial performance in firms listed on the TSE and IFB.

To examine the above hypothesis using the information presented in Table 4, it can be stated that the significance level for the interaction term (ED × CG) is 0.000, with a t-statistic of 12.103 and a coefficient of 0.138. Since the p-value is less than 0.05, it can be concluded that CG significantly moderates the relationship between ED and financial performance in firms listed on the TSE and IFB. Therefore, the above hypothesis—namely, “CG moderates the relationship between ED and financial performance in firms listed on the TSE and IFB”—is supported at the 95% confidence level.

Based on the research findings and the confirmation of the study hypotheses, the following practical recommendations are proposed:

I. Considering the significant impact of ED on firms’ financial performance, it is recommended that companies listed on the TSE and IFB enhance the scope and accuracy of their environmental reporting to promote transparency and CSR. Such measures can improve investors’ perceptions, strengthen public trust, and ultimately enhance financial performance.

II. Given the moderating role of CG in the relationship between ED and financial performance, it is recommended that regulatory bodies, such as the Securities and Exchange Organization, design and implement policies to strengthen CG mechanisms. These measures may include increasing the independence of board members, establishing effective audit committees, and enhancing informational transparency, thereby enabling firms to leverage environmental reporting more effectively and improve their financial outcomes.

There is always a possibility of disruptive or interfering factors in research that may impede normal procedures and affect the results, as is the case in any other study. The attenuation of research findings reflects the influence of these unintended factors, which in some instances may become more pronounced. In any case, controlling for and accounting for the impact of such factors is of critical importance for the integrity of the study. The main limitations of the present research are as follows: access to the required data—which is often a significant challenge in the TSE—led to the exclusion of certain companies from the sample. Furthermore, the reduction in sample size for some tests may have affected their statistical power. Nevertheless, efforts were made to ensure that, by maintaining a minimum meaningful sample size, the results of the study retained sufficient validity and reliability.

Future researchers are recommended to consider the following in their studies: researchers may categorize firms into profitable versus loss-making companies, as well as small versus large firms, to examine the impact of ED and CG on firm performance.