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

Abstract

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.

The Role of CSR Committee in the Sustainability Reporting on the Financial Performance of Energy Sector Companies in Indonesia

“…The existence of a CSR committee will reduce information asymmetry for companies and stakeholders, because the CSR committee, although not significantly moderating, is still positive regarding environmental, social and governance performance. Thus, companies use CSR committees to create the impression that the CSR activities carried out by the company are operating in the right way to meet the expectations of environmental and social preservation of society, but not yet the return on company assets (Arayssi & Jizi, 2023). The findings of this research also show that in practice sustainability reporting in Indonesian energy sector companies has not met expectations regarding reporting of non-financial information.…”

Impact of ESG Risk Scores on Firm Performance: An Empirical Analysis of NSE-100 Companies

“…Arayssi and Jizi (2023) found that royal family directors on GCC boards negotiate fewer ESG reporting in firms. Shalhoob and Hussainey (2023) found that SMEs in Saudi Arabia lack awareness of ESG practices and disclosures and, therefore, the extent of their importance to sustainability performance.…”

“…Thus, ESG disclosure has become a burning issue in the field of corporate financial reporting, and, hence, this paper attempts to explore the impact of ESG risk score on firm performance. Arayssi and Jizi (2023) found that royal family directors on GCC boards negotiate fewer ESG reporting in firms. Shalhoob and Hussainey (2023) found that SMEs in Saudi Arabia lack awareness of ESG practices and disclosures and, therefore, the extent of their importance to sustainability performance.…”

How ESG Reporting Effects on Green Credit , Green Investment : Moderating Role of Growth Sales

“…The total number of board meetings, firm size, leverage, board independent) to check the magnitude of impact on ESG REPORTING. Numerous studies have used these variables for firm performance, among them, (Arayssi & Jizi, 2023;Bilyay-Erdogan & Öztürkkal, 2023;Lewellyn & Muller-Kahle, 2023;Lin et al, 2023;Rahman et al, 2023;Rauf et al, 2021;. Finally, we incorporated year dummies to control for the possible influence of time, as well as industry dummies to account for the unique effect of industry.…”