Revisiting the relationship between corporate governance mechanisms and ESG disclosures in Saudi Arabia

Abstract

Purpose

This paper aims to examine the effects of corporate governance mechanisms (board chairman independence, board independent director meeting attendance, audit committee size and audit committee meetings) on the environmental, social and governance (ESG) and its individual component disclosures of listed firms in Saudi Arabia.

Design/methodology/approach

The study used unbalanced panel data obtained from the Bloomberg data set over 11 years, from 2010 to 2020.

Findings

The findings indicate that board chairman independence (BCI) and audit committee size (AC size) have a significant negative and positive association with ESG disclosure, respectively. However, the results show that board independent director meeting attendance (BIMA) and audit committee meetings (AC meetings) do not significantly influence ESG disclosure. Regarding the individual dimensions (components), the results show that only BIMA has a significant negative association with environmental disclosure. Besides, only BCI and AC meetings have a significant positive association with social disclosure. Also, only BIMA and AC size have a significant positive and negative relationship with governance disclosure, respectively.

Research limitations/implications

The study used a sample of 29 listed companies in Saudi Arabia. Each firm has at least four years of ESG disclosures. Besides, the paper considered only four corporate governance attributes, comprising two each for the board and audit committee.

Practical implications

The results provide insights to regulators, boards of directors, managers and investors to enhance ESG and its components’ reporting toward the sustainable operations and better performance of Saudi firms.

Originality/value

This study is among the few that provide empirical evidence on how some essential corporate governance attributes that have not been given adequate attention by prior studies (board chairman independence, board independent directors’ meeting attendance, audit committee size and audit committee meetings) influence not only ESG reporting as a whole but also its individual dimensions (components).

Citation

Umar, U.H., Firmansyah, E.A., Danlami, M.R. and Al-Faryan, M.A.S. (2024), "Revisiting the relationship between corporate governance mechanisms and ESG disclosures in Saudi Arabia", Journal of Accounting & Organizational Change, Vol. 20 No. 4, pp. 724-747. https://doi.org/10.1108/JAOC-01-2023-0011