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Article
Publication date: 5 September 2018

Abdullah S. Karaman, Merve Kilic and Ali Uyar

The purpose of this study is to investigate empirically what affects Global Reporting Initiative (GRI)-based sustainability reporting and its relationship with firm performance in…

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Abstract

Purpose

The purpose of this study is to investigate empirically what affects Global Reporting Initiative (GRI)-based sustainability reporting and its relationship with firm performance in the aviation industry between 2006 and 2015.

Design/methodology/approach

The authors derived data from the GRI Sustainability Disclosure Database and Thomson Reuters EIKON; from the former, they downloaded GRI-based reports, and from the latter, they obtained financial data. The authors performed four-level analysis – report existence, report count, application level of report and firm performance –using various regression models (i.e. logistic regression, Poisson regression, ordered logistic regression and ordinary least squares regression).

Findings

First, the authors based the analysis on the existence of GRI-based sustainability reports, which showed that firm size and leverage are positively associated with sustainability reporting. Contrary to expectations, ownership was negatively associated. Furthermore, free cash flow per share, growth and profitability do not have significant effects on sustainability reporting, in contrast to expectations. Subsequent analysis was based on report count (number of total published reports within the examination period) and application levels of reports. Compared to the preceding analysis, there were no notable surprises. In addition, we found evidence that growth is negatively associated with application levels of reports (partially supported). Thus, report existence, report count and application level results largely confirm each other. Finally, the authors tested the effect of sustainability reporting on firm performance, which did not produce significant results. Thus, in the aviation industry, sustainability reporting does not play a significant role in enhancing firm performance.

Practical implications

First, the findings show that larger and highly leveraged aviation firms can reduce agency and legitimacy costs through sustainability reporting. Surprisingly, the same assumption did not hold for ownership structure as the firms with diffused ownership base tend not to publish sustainability reports. Thus, boards are advised to establish and improve monitoring mechanisms in these types of firms. Second, although the number of aviation companies publishing separate sustainability reports has increased significantly over the years, almost half of the companies are not still producing sustainability reports. Hence, if the aviation industry believes the merits of engaging in sustainability issues and sincerely desires to enhance its sustainability reporting practices, the authors can suggest the following initiatives. Boards might encourage companies to incorporate sustainability issues into company operations by assigning the necessary financial and human resources. The boards might also establish a separate sustainability committee or department, which could focus on sustainability issues and reporting practices. Regulatory bodies could also encourage aviation companies to act in a socially and environmentally responsible manner by proposing legal requirements and providing guidance.

Social implications

Relevant civil organisations and environmental activists might undertake more active roles to enhance awareness of sustainability issues in the aviation industry.

Originality/value

Most of the prior studies did not focus on standalone GRI-based sustainability reports, and they were conducted on limited samples and not the aviation industry in particular. This study aims to fill these gaps empirically by establishing testable hypotheses and attempting to demonstrate the validity of theoretical relationships in a wide range of data and among aviation companies worldwide. In this sense, this study is unique in what it undertakes. This study also tests whether sustainability reporting impacts firm value in the aviation industry which, to the best of the authors’ knowledge, has not been examined in prior studies to this extent.

Details

Sustainability Accounting, Management and Policy Journal, vol. 9 no. 4
Type: Research Article
ISSN: 2040-8021

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Article
Publication date: 13 June 2023

Cemil Kuzey, Habiba Al-Shaer, Abdullah S. Karaman and Ali Uyar

Growing social concerns and ecological issues accelerate firms’ environmental, social and governance (ESG) engagement. Hence, this study aims to advance the existing literature by…

Abstract

Purpose

Growing social concerns and ecological issues accelerate firms’ environmental, social and governance (ESG) engagement. Hence, this study aims to advance the existing literature by focusing on the interplay between institutional and firm governance mechanisms for greater ESG engagement. More specifically, the authors investigate whether public governance stimulates excessive ESG engagement and whether corporate governance moderates this relationship.

Design/methodology/approach

Using a sample of 43,803 firm-year observations affiliated with 41 countries and 9 industries, the authors adopt a country, industry and year fixed-effects regression analysis.

Findings

The authors find that public governance strength via its six dimensions stimulates excessive ESG engagement. This implies that firms in countries with strong voice and accountability, political stability, government effectiveness, regulatory quality, rule of law and control of corruption are more motivated for ESG engagement. Furthermore, corporate governance negatively moderates the relationship between all public governance dimensions (except political stability) and excessive ESG engagement. This implies that public governance and corporate governance are substitutes for encouraging firms to commit to ESG. Further tests reveal that whereas these results in the baseline analyses are valid for developed countries, they are not valid in emerging markets.

Research limitations/implications

The findings support the interplay between institutional and agency theories. In countries with strong (weak) institutional mechanisms, corporate governance becomes weak (strong) in inciting greater stakeholder engagement. This implies that the public governance mechanism alleviates agency costs, rendering internal mechanisms of corporate governance noncompulsory for ESG engagement.

Practical implications

The findings suggest that emerging countries need to reinforce their institutions for greater accountability, regulatory quality and control of corruption, which will have a domino effect on firms in addressing stakeholder expectations. The results also advise emerging country firms to augment their internal monitoring mechanisms for greater stakeholder engagement, such as structuring boards and establishing corporate social responsibility mechanisms, committees and policies.

Originality/value

This study contributes to the recent literature investigating the role of corporate governance mechanisms in excessive ESG engagement. The study also explores whether public governance is associated with greater ESG involvement and provides a comprehensive analysis of the association between six indicators of public governance quality and excessive ESG practices in developed and emerging economies.

Details

Corporate Governance: The International Journal of Business in Society, vol. 23 no. 7
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 15 May 2023

Nurlan Orazalin, Cemil Kuzey, Ali Uyar and Abdullah S. Karaman

This study tests whether corporate social responsibility (CSR) performance is a predictor of the financial sector's financial stability (FS), with the moderation of a…

Abstract

Purpose

This study tests whether corporate social responsibility (CSR) performance is a predictor of the financial sector's financial stability (FS), with the moderation of a sustainability committee.

Design/methodology/approach

The sample covers financial sector firms included in the Thomson Reuters Eikon database. The analyses are based on 8,840 firm-year observations for the years between 2002 and 2019 and the country-firm-year fixed-effects (FE) regression analysis is executed.

Findings

The results reveal that CSR initiatives contribute to the financial sector's FS as a whole and the sector's three individual sub-sectors. This proven significant association holds for all sub-sectors, namely insurance, banking, and investment banking. Moreover, the moderation analysis reveals the prominent role of a sustainability committee in bridging CSR performance (CSRP) with FS.

Research limitations/implications

The findings highlight that meeting societies' expectations pays back in the form of greater FS in the financial sector.

Practical implications

The findings suggest that CSR engagement helps the financial sector firms manage their risks and alleviates exposure to insolvency. This is because CSR performance promotes firms' accountability and transparency toward stakeholders. The results help motivate managers to pursue CSR goals more seriously to ensure FS. The moderation analysis implies that sustainability committees develop policies and practices to integrate the non-financial and financial goals of the firm.

Originality/value

Although prior studies have examined the link between CSR and financial performance (FP) in the financial sector, those studies have largely ignored FS in terms of risk-adjusted performance. Besides, prior studies have exclusively focused on the banking sector, but the authors concentrate on the banking, insurance, and investment banking sectors.

Details

Journal of Applied Accounting Research, vol. 25 no. 1
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 22 May 2023

Cemil Kuzey, Ali Uyar and Abdullah S. Karaman

This study aims to test whether over-investment is associated with environmental, social and governance (ESG) variation (i.e. inequality) across its dimensions, which, if so…

Abstract

Purpose

This study aims to test whether over-investment is associated with environmental, social and governance (ESG) variation (i.e. inequality) across its dimensions, which, if so, would imply the prioritization of the interests of some stakeholders over those of others.

Design/methodology/approach

Drawing on a global sample of 29,428 observations across nine sectors and 41 countries between 2003 and 2019, the authors executed a country-industry-year fixed-effects regression analysis. In the robustness tests, this study also used the entropy balancing and propensity score matching approaches.

Findings

The authors found that while firm over-investment increases social pillar inequality, it reduces environmental pillar inequality. Further analysis revealed that the over-investment strategy decreases (increases) ESG inequality in low (high) environmental and social performers. This outcome could be of relevance to internal governance mechanisms and policymaking as ESG inequality might raise legitimacy concerns and hamper the long-term sustainability of firms.

Practical implications

The outcome of the study could be of relevance to internal governance mechanisms as well as policymaking. Considering financial constraints, firms should maintain a balanced strategy between firm investment and addressing stakeholder interests. Otherwise, over-investment might reduce environmental and social engagement in some dimensions, which could prompt criticisms and legitimacy concerns about firms and some stakeholders.

Originality/value

Past research has intensively focused on whether ESG – rather than ESG inequality – is associated with investment (in)efficiency. In addition, it has mostly formulated the causality running from ESG to firm investment, and hence, the literature lacks heterogeneity in this respect. Nevertheless, the authors believe that the potential effect of firm investment on ESG is of critical importance and has implications for determining whether over-investment causes variations across ESG engagement. Thus, the authors addressed this gap in the literature by investigating the relationship between over-investment and ESG inequality.

Details

Review of Accounting and Finance, vol. 22 no. 3
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 15 December 2023

Cemil Kuzey, Ali Uyar, Nejla Ould Daoud Ellili and Abdullah S. Karaman

This study aims to examine the potential threshold effect in the association between corporate social responsibility (CSR) performance and social reputation.

Abstract

Purpose

This study aims to examine the potential threshold effect in the association between corporate social responsibility (CSR) performance and social reputation.

Design/methodology/approach

This study includes an international and cross-sector sample covering 41 countries, nine sectors and 45,395 firm-year observations. It applies a parabolic relationship, rather than linear regressions, between CSR engagement and social reputation via CSR awarding. This implies that CSR performance should increase until a certain point to gain a social reputation but then should decrease after reaching that threshold point considering limited financial resources.

Findings

The findings of country-industry-year fixed-effects logistic regressions confirm the threshold effect with an inverted U-shaped relationship between CSR and CSR awarding. More specifically, firms increase their environmental and social engagement until a certain point, and then they reduce it after reaching a social reputation. This finding is confirmed by three dimensions of the environmental pillar (i.e. resource use, emissions and eco-innovation) as well as four dimensions of the social pillar (i.e. workforce, human rights, community and product responsibility). The findings are robust to alternative samples, alternative methodology and endogeneity concerns.

Practical implications

The findings of this study have implications for firms about the better allocation of available funds between CSR and operations. The findings could be particularly useful for CSR teams/committees of the firms who formulate CSR policies and how to mobilize firm resources for better social enhancement via environmental and social reputation.

Originality/value

This study examines deeper the nature of the association between CSR engagement and social reputation and considers the possibility of an inverted U-shaped relationship between them. The determination of a threshold effect suggests that CSR engagement increases social reputation, but once it reaches a certain point, social reputation will decrease owing to financial resource constraints.

Details

Corporate Governance: The International Journal of Business in Society, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 11 October 2023

Ali Uyar, Ali Meftah Gerged, Cemil Kuzey and Abdullah S. Karaman

This study aims to guide firms in emerging markets on whether corporate social responsibility (CSR) engagement facilitates their access to debt with the moderation of asset…

Abstract

Purpose

This study aims to guide firms in emerging markets on whether corporate social responsibility (CSR) engagement facilitates their access to debt with the moderation of asset structure and firm performance. Considering the moderating effect analysis, this study explores the substitutive or complementary effect of these two contingencies on CSR-oriented firms in accessing debt financing.

Design/methodology/approach

Drawing on data collected for 16 emerging markets between 2008 and 2019, this study runs country–industry–year fixed-effects regression.

Findings

This study finds that CSR performance and reporting facilitate access to debt in emerging markets. However, CSR performance does not have an inverted U-shaped influence on firms’ access to debt financing. The moderation analysis of this study shows that asset tangibility has a negative moderating effect on the link between CSR engagements (i.e. both CSR performance and reporting) and access to debt, confirming a substitutive relationship between asset tangibility and CSR engagements in accessing debt. In contrast, firm performance is positively moderating the nexus between CSR engagement proxies and access to debt, which confirms a complementary type of relationship between firm performance and CSR engagements in accessing debt.

Practical implications

The empirical evidence of this study implies that creditors critically consider CSR engagements of firms in the loan-granting decision process. Similarly, the inverted U-shaped relationship between CSR and access to debt implies that there is an optimal level of CSR engagement creditors might consider in their decision. Likewise, the moderating effects analysis highlights that asset tangibility and firm performance are two conditions under which CSR performance and reporting are linked to access to debt.

Originality/value

Emerging countries are a different set of countries than developed ones; they have high growth rates and hence need financing, have a weaker institutional environment and have weaker stakeholder power. These particularities motivated the authors to conduct a separate study focusing on CSR and debt financing links drawing on a wide range of emerging countries. Thus, this study adds to the ongoing debate by examining the conditions under which CSR-oriented firms can access debt financing in emerging economies.

Details

Review of Accounting and Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 21 July 2023

Moataz Elmassri, Cemil Kuzey, Ali Uyar and Abdullah S. Karaman

This study aims to examine the effect of corporate social responsibility (CSR) adoption on differentiation and cost leadership strategies and how governance structure moderates…

Abstract

Purpose

This study aims to examine the effect of corporate social responsibility (CSR) adoption on differentiation and cost leadership strategies and how governance structure moderates this CSR–strategy relationship.

Design/methodology/approach

The study data were retrieved from Thomson Reuters for non-financial firms between 2013 and 2019, and a fixed-effects panel regression analysis was executed.

Findings

The results indicate that CSR fosters cost leadership strategy but weakens differentiation strategy. This result supports the value generation school for cost leaders but also confirms the agency theory perspective for differentiators. Moreover, the governance structure does not moderate the relationship between a firm's CSR engagement and its business strategy, which implies a lack of corporate policies that concurrently consider both its CSR investment and strategies.

Research limitations/implications

The findings of this study imply that cost leaders can integrate CSR practices into their business strategy and use their CSR engagement to increase their competitive position by stimulating cost efficiency and creating greater turnover. On the contrary, for differentiators, there is a trade-off between environmental and social engagement and business strategies. Thus, they are advised to enrich their unique product development abilities through the integration of environmental and social practices and reinforce their competitive position by addressing stakeholders' interests. The practical implication of the moderation analysis is that there is no rooted corporate policy behind the connection between CSR and firm strategy for both cost leaders and differentiators, which constitutes a missing link.

Originality/value

The findings of this study are of critical importance for firms, offering justification for the integration of two vital perspectives: social and environmental sustainability and financial sustainability. The moderating effect of governance performance tests the upper echelon's role in maintaining both sustainability perspectives concurrently and strengthening the legitimacy of the firms in society. Although maintaining a business strategy is important for shareholders' interests, pursuing a social and environmental sustainability strategy is crucial for meeting the expectations of all stakeholders.

Details

Management Decision, vol. 61 no. 10
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 10 January 2023

Khalil Nimer, Cemil Kuzey and Ali Uyar

This study investigated the micro–macro link in the hospitality and tourism (H&T) sector, specifically considering whether the gender diversity, independence and board attendance…

Abstract

Purpose

This study investigated the micro–macro link in the hospitality and tourism (H&T) sector, specifically considering whether the gender diversity, independence and board attendance rates of H&T firms' boards, alongside the moderation effect of board policies, played a significant role in tourism sector performance.

Design/methodology/approach

The 2011–2018 data were retrieved from the World Bank and the Thomson Reuters Eikon databases, and fixed effects panel regression was conducted.

Findings

While female directors were a significant driver of tourism sector performance in terms of tourist arrivals and tourism receipts, independent directors were effective in improving tourist arrivals only. Furthermore, moderation analyses demonstrated the inefficacy of board policies in enhancing these directors' contributions to the sector's development. Moreover, the findings revealed the inefficiency of board meetings.

Practical implications

Concerning the efficacy of board policies, the results suggest that firms' boards should review and revise their policies. Surprisingly, while board-diversity policies made no difference to female directors' role in the sector's development (although females were influential), board-independence policies produced unexpected results. In the absence of a board-independence policy, independent directors are influential, but if a policy exists, they are not.

Originality/value

Although prior firm-level studies tested whether board characteristics enhanced firms' performance in the H&T sector, they did not investigate whether board characteristics promoted tourism sector performance. Moreover, the moderating effect of board policies on boards' structures and tourism sector performance has not yet been examined.

Details

International Journal of Productivity and Performance Management, vol. 73 no. 2
Type: Research Article
ISSN: 1741-0401

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Article
Publication date: 6 December 2022

Monomita Nandy, Cemil Kuzey, Ali Uyar, Suman Lodh and Abdullah S. Karaman

This paper focuses exclusively on the drivers and consequences of Global Reporting Initiative (GRI) adoption in sustainability reports with a particular focus on corporate social…

Abstract

Purpose

This paper focuses exclusively on the drivers and consequences of Global Reporting Initiative (GRI) adoption in sustainability reports with a particular focus on corporate social responsibility (CSR) mechanisms.

Design/methodology/approach

The sample includes 63 countries with 4,625 unique firms in these countries and 29,054 firm-year observations between 2002 and 2019. The empirical methodology is logistic and linear regression analyses with country and year fixed effects.

Findings

The findings show that CSR committees and executive CSR compensation stimulate firms' GRI adoption. Furthermore, while GRI adoption enhanced firm value in the earlier period of 2002–2010, it weakened firm value in the later period between 2011 and 2019 implying a loss of value relevance. However, the moderating effect of CSR committees and executive CSR compensation on GRI adoption has led to higher firm value in recent times. A more in-depth investigation of polluting versus non-polluting sectors and weak and strong institutional environments reveals both convergence and divergence respectively among these sub-samples. The results are robust to alternative samplings, alternative methodology and endogeneity concerns.

Research limitations/implications

The main limitations of the study are the binary nature of key variables, such as CSR committee, executive CSR compensation and GRI adoption, due to the availability of binary data but not continuous data.

Practical implications

Firms allocate substantial funds for SR and following GRI guidelines; hence, the findings guide them on how to ensure the return on this investment.

Social implications

Shareholders who particularly pursue socially responsible investment can shape their investment portfolios in firms that engage with sustainability reporting (SR) and GRI adoption practices.

Originality/value

It is not clear in the literature if CSR committees will adopt the GRI for SR because of any incentive. Thus, we examine if the CSR committee and executive CSR compensation can play a direct role in GRI adoption and play a moderating role between GRI adoption and firm value. Moreover, whether GRI adoption and its value relevance might change across periods, sectors (polluting versus non-polluting) and varying institutional environments (investor protection) are addressed in this study.

Details

Journal of Applied Accounting Research, vol. 24 no. 4
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 1 November 2023

Cemil Kuzey, Hany Elbardan, Ali Uyar and Abdullah S. Karaman

The purpose of this study is to investigate the association between sustainability reporting (SR) and firm value considering the moderating effect of audit committee (AC) quality…

Abstract

Purpose

The purpose of this study is to investigate the association between sustainability reporting (SR) and firm value considering the moderating effect of audit committee (AC) quality and auditor tenure on this association.

Design/methodology/approach

The data for the study comprise 41,500 firm-year observations worldwide between 2007 and 2018 drawing on ten main sectors. The authors run a country-industry-year fixed effect regression and address endogeneity concerns with further methodologies.

Findings

First, the authors find that SR is significantly and positively associated with both firm value and industry-adjusted firm value. Further tests revealed that the baseline findings hold for SR assurance and the Global Reporting Initiative framework as well. Second, the moderation analysis outlined the significant moderating role that the AC assumes. More specifically, AC independence and expertise were found to strengthen the value relevance of SR. Third, the market also appreciates the moderation of auditor tenure in SR.

Practical implications

Investors appreciate greater corporate transparency which means that sustainability reports are likely to reduce information asymmetry and thereby agency conflicts. In addition, the moderation analyses imply that shareholders consider AC quality while they attach value to corporate sustainability reports. Hence, the structure of the auditing function appears to perform an implicit assurance role in the value relevance of sustainability reports. In line with these implications, corporations can review and re-design their auditing function and decide whether or not they will attest to sustainability reports given that AC independence and expertise and auditor tenure predict this decision.

Originality/value

The study highlights the audit function’s growing role beyond financial reporting and suggests implications for ACs and auditors in ensuring shareholders about the credibility of SR.

Details

International Journal of Accounting & Information Management, vol. 31 no. 5
Type: Research Article
ISSN: 1834-7649

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