Corporate Governance Mechanisms and ESG Reporting: Evidence from the Saudi Stock Market

Bamahros, Hasan Mohammed; Alquhaif, Abdulsalam; Qasem, Ameen; Wan‐Hussin, Wan Nordin; Thomran, Murad; Al-Duais, Shaker Dahan; Shukeri, Siti Norwahida; Khojally, Hytham M. A.

doi:10.3390/su14106202

Cited by 48 publications

(43 citation statements)

References 99 publications

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“…Moreover, to protect their reputation, royal family members might avoid violations or behavior that could compromise ethical standards while doing business; hence, the authors confirmed a positive relationship between the presence of royal family directors and CSR reporting. Similarly, Bamahros et al (2022) found that the presence of royal family members on board significantly increased the ESG disclosure in Saudi publicly listed firms. Hence, corporate governance was found to be helpful in restricting the unfavorable effects of politically connected board members; it also improves firms’ transparency (Al-Hadi et al , 2018).…”

Section: Literature Reviewmentioning

confidence: 89%

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Royal family board directors and the level of ESG disclosures in GCC listed firms

Arayssi

Jizi

2023

JAOC

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Purpose This study aims to examine the role of royal family members’ board of directors, as a specific aspect of corporate governance, on the firm’s environmental, social and governance (ESG) disclosures. Many firms in the world enjoy special political connections, benefit from tax exemptions and favorable treatments that are largely responsible for their economic endurance and strong performance. Design/methodology/approach The authors collect data from Thomson Reuters database on Gulf Cooperation Council (GCC)-listed firms for 2010–2018. Royal family board directors’ data is manually collected using a systematic approach to ensure accuracy. Fixed effects’ panel regression model is used to estimate relationships. The authors interact variables to test the moderating effect of board independence and sustainability committee on the influence of royal family board directors. Findings This study finds that royal family directors on GCC boards negotiate fewer ESG reporting in firms. While board independence, board gender diversity, sustainability committee and governance committee increase the level of ESG-disclosures in the traditional way of reducing agency costs to stakeholders, this study finds that royal family board members convey beneficial consequences on firms without perceiving the need to disclose their ESG activities. Additionally, these firms do not show a spillover effect from the royal family members on the board’s independence or the existence of a sustainability committee; rather these members use a different channel for protecting and building the business value. These results are robust with respect to controls for company size, leverage, return on assets and growth. Instrumental variables are then introduced in the analysis to perform a sensitivity test. Originality/value The study results indicate the need to improve GCC market transparency over supplementary limitations that exist on their corporate governance condition. This may be consequential to regulators, lenders and investors. The results suggest the need to raise awareness of the importance of governance and balancing firms’ financial and social performance in the presence of royal family board directors. Policymakers and governance agencies are responsible for promoting the importance of forming sustainability committees and having a set of performance indicators that measure the effectiveness of their actions.

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Section: Literature Reviewmentioning

confidence: 89%

“…Prior literature offers opposing results on the influence of royal family board members on ESG disclosure. While Bamahros et al (2022) showed that royal family members increase ESG disclosure, Al-Bassam et al (2018) reported negative effect of royal family on ESG disclosure.…”

Section: Introductionmentioning

confidence: 94%

Royal family board directors and the level of ESG disclosures in GCC listed firms

Arayssi

Jizi

2023

JAOC

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“…Ismail and Latiff (2019) submit that board age diversity, board capabilities, and board reputation are significantly and positively influencing ESGD. In a study conducted in Saudi Arabia, it was found that having a royal family on the firm board increases ESGD (Bamahros et al, 2022).…”

Section: Determinants Of Esgdmentioning

confidence: 99%

“…Just like the woman on the board, audit committee gender diversity also positively influences a firm's ESG performance (Bravo & Reguera-Alvarado, 2019). Bamahros et al (2022) found that having external members on the audit committee can enhance ESG activities. Besides the audit committee's characteristics, Hammami and Zadeh (2020) submit that audit quality, as well as public media exposure, can drive higher firms' ESG transparency.…”

Section: Determinants Of Esgdmentioning

confidence: 99%

Determinants of environmental, social, and governance disclosure: A systematic literature review

Seow

2023

Bus Strat Env

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The popularity of environmental, social, and governance (ESG) investing or socially responsible investing is pushing private sectors to improve their ESG performance. Stakeholders, namely, investors, are relying on firms' environmental, social, and governance disclosures (ESGD) to evaluate their ESG performance and strategize their investment decision‐making. Since firms have substantial discretionary power in deciding the quantity and quality of ESGD, understanding the drivers and motivations of ESGD is paramount. This study examines the literature on the determinants of ESGD, and 36 articles published in a period spanning from 2006 to 2022 were analyzed and synthesized via a systematic literature review approach. Ninety‐one researchers from 30 countries contributed to these studies. Of these studies, 28% perform cross‐country investigations. This study found that although there is no single underpinning theory for ESGD, ESGD determinant studies are well supported by multiple theoretical frameworks, such as stakeholder theory, legitimacy theory, and institutional theory. This study reveals many factors that have an impact on ESGD, such as natural disasters, political and legal systems, ownership structure, board characteristics, and the CEO's characteristics. This study contributed to the burgeon of literature on ESG by offering valuable insights into the antecedents to ESG performance and facilitating future enhancements of a better ESGD framework. Lastly, this study also reveals future research directions for scholars to enrich the burgeoning literature in ESG.

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“…Firm size is an important internal factor affecting ESG disclosure, and most studies have demonstrated a positive relationship between firm size and ESG disclosure (Ali et al 2018;Chen et al 2022a;Gallego-Alvarez and Quina-Custodio 2016;Lu and Abeysekera 2014;Miklosik et al 2021;Mura et al 2019;Nguyen et al 2021). Corporate governance has a strong influence on ESG disclosure (Bae et al 2018;Bamahros et al 2022), and a high level of corporate governance facilitates the legitimate management and disclosure of social responsibility information (Liu and Zhang 2017). Corporate governance promotes CSR reporting in the form of a socially responsible board of directors, while government shareholding influences the quality of CSR reporting, and corporate governance moderates some of the cultural influences that are detrimental to CSR reporting (Adnan et al 2018).…”

Section: Intrinsic Dynamics Of Esg Disclosurementioning

confidence: 99%

Does Green Finance Policy Contribute to ESG Disclosure of Listed Companies? A Quasi-natural Experiment from China

Zhang

et al. 2023

Preprint

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Based on institutional theory, legitimacy theory and signaling theory, this article uses the difference-in-differences (DID) model to investigate the influence of the Guidance on Building a Green Financial System jointly issued by the People’s Bank of China (PBC) and six other ministries on ESG disclosure of A-share listed companies in the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE) from 2014 to 2018. The results suggest that the publication of the Guidance positively contributes to the ESG disclosure quality (ESGdq) of listed companies. Further analysis shows that the positive effect of the Guidance on ESGdq is greater for listed companies in heavily polluting industries, state-owned and in regions with higher levels of economic development. Conclusions obtained through our research enrich the economic consequences of green finance policy, provide practical implications for enhancing corporate ESG disclosure, integrating ESG concepts into corporate strategies and governance systems.

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Corporate Governance Mechanisms and ESG Reporting: Evidence from the Saudi Stock Market

Cited by 48 publications

References 99 publications

Royal family board directors and the level of ESG disclosures in GCC listed firms

Royal family board directors and the level of ESG disclosures in GCC listed firms

Determinants of environmental, social, and governance disclosure: A systematic literature review

Does Green Finance Policy Contribute to ESG Disclosure of Listed Companies? A Quasi-natural Experiment from China

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