The Influence of Board Characteristics on Corporate Sustainability Disclosures in Sub-Saharan Africa

Emmanuel Christopher, Judika King'ori, Henry Chalu

Abstract


Despite acknowledging that corporate sustainability disclosures (CSD) are important in driving the sustainability agenda at a firm’s level, there is limited research on the relationship between firm’s highest governing organ and CSD, particularly in the context of developing countries. As such, this study contributes to empirical evidence by investigating the influence of board characteristics on CSD. The study used a panel dataset of 165 firms in 12 Sub-Saharan African countries for the 2015 – 2019 period, hence a total of 825 firm year observations. The study results show that board size has an inverted u-shaped relationship with CSD whereas board diversity in terms of gender and board committee have  a significant positive influence on CSD. It was also found that the CEO power and board compensation have a significant negative influence on CSD while board diversity, independence and meetings do not have a significant influence on CSD. The study findings imply that, policy makers seeking to enhance the extent of CSD should consider it jointly with entity governance tools instead of treating it as an independent corporate activity. Particularly, it is recommended that, governments through their regulatory agencies such as security and capital markets authorities (and similarly shareholders) need to consider an appropriate mix of board characteristics towards the enhancement of CSD.

Full Text:

PDF

References


Adams, R., & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of Financial Economics, 94 (2), 291-309.

Agudelo, M. A., Jóhannsdóttir, L., & Davídsdóttir, B. (2019). A literature review of the history and evolution of corporate social responsibility. International Journal of Corporate Social Responsibility, 4, 1-23.

Ahmad, N. B., Rashid, A., & Gow, J. (2017). Board meeting frequency and corporate social responsibility (CSR) reporting: Evidence from Malaysia. Corporate Board: role, duties and composition, 13(1), 87-99.

Alchian, A. A., & Demsetz, H. (1972). Production, information costs, and economic organization. The American Economic Review, 62 (5), 777-795.

Ali, W., Frynas, J. G., & Mahmood, Z. (2017). Determinants of corporate social responsibility (CSR) disclosure in developed and developing countries: A literature review. Corporate Social Responsibility and Environmental Management, 24(4), 273-294.

Allegrini, M., & Greco, G. (2011). Corporate boards, audit committees and voluntary disclosure: evidence from Italian listed companies. Journal of Management & Governance, 17, 187–216.

Amran, A., Lee, S. P., & Selvaraj, S. (2013). The influence of governance structure and strategic corporate social responsibility toward sustainability reporting quality. Business Strategy and the Environment, 23(4), 217-235.

Arfken, D. E., Bellar, S., & Helms, M. M. (2004). The ultimate glass ceiling revisited: The presence of women on corporate boards. Journal of Business Ethics, 50(2), 177-186.

Aslam, E., Haron, R., & Tahir, M. N. (2019). How director remuneration impacts firm performance: An empirical analysis of executive director remuneration in Pakistan. Borsa Istanbul Review, 19(2), 186-196.

Bansal, P. (2005). Evolving Sustainability: A longitudinal study of corporate sustainable development. Strategic Management Journal, 26, 197–218.

Carter, D. A., Simkins, B., & Simpson, W. (2003). Corporate governance, board diversity and firm value. Financial Review, 38, 33-53.

Chen, K. D., & Wu, A. (2016). The structure of board committees. Harvard Business School Working Paper, No. 17-032.

Christopher, E., & Chalu, H. (2020). Factors influencing voluntary sustainability reporting for oil and gas companies in Tanzania. Business Management Review, 22(1), 130-149.

Clifford, P., & Evans, R. (2002). Non-Executive directors: A question of independence. Corporate Governance: An international Perspective, 5(4) 224-231.

Crifo, P., Escrig Olmedo, E., & Mottis, N. (2019). Corporate governance as a key driver of corporate sustainability in France: The role of board members and investor relations. Journal of Business Ethics, 159, 1127–1146.

DeKluyver, C. A. (2009). A Primer on Corporate Governance. Williston: Business Expert Press.

Doupnik, T., & Perera, H. (2012). International Accounting, McGraw-Hill: UK.

Elkington, J. (1994). Towards the sustainable sorporation: Win-win-win business strategies for sustainable development. California Management Review, 36, 90-100.

Freeman, R. E. (1984). Strategic Management: A stakeholder Approach. Boston: MA: Pitman.

Frías-Aceituno, J.-V., Rodríguez-Ariza, L., & Sánchez, I. M. (2013). The Role of the Board in the Dissemination of Integrated Corporate Social Reporting. Corporate Social Responsibility and Environmental Management, 20(4), 219-233.

Funk, K. (2003). Sustainability and performance. MIT Sloan Management Review, 44(2), 65-70.

Galbreath, J. (2009). Building corporate social responsibility into strategy. European Business Review, 21(2), 109-127.

Gill, A. (2008). Corporate governance as a social responsibility: A research Agenda. Berkeley Journal of International Law, 26(2), 452-478.

Gray, R., & Milne, M. (2002). Sustainability reporting: Who's kidding whom? Chartered Accountants Journal of New Zealand, 81(6), 66-70.

Guest, P. M. (2010). Board structure and executive pay: Evidence from the UK. Cambridge Journal of Economics, 34, 1075-1096.

Gujarati, D. N. (2009). Basic Econometrics. Tata McGraw-Hill Education. New Delhi: Tata McGraw-Hill Education.

Haji, A. A. (2013). Corporate social responsibility disclosures over time: Evidence from Malaysia. Managerial Auditing Journal, 28(7), 647-676.

Handajani, L., Subroto, B., Sutrisno, T., & Saraswati, E. (2014). Does board diversity matter on corporate social disclosure? Indonesian evidence. Journal of Economics and Sustainable Development, 5, 8-16.

Haniffa, R., & Cooke, T. (2005). The impact of culture and governance on corporate social reporting. Journal of Accounting and Public Policy, 24, 391–430.

Haque, F. (2017). The effects of board characteristics and sustainable compensation policy on carbon performance of UK firms. British Accounting Review, 49, 347–364.

Harjoto, M., Laksmana, I., & Lee, R. (2014). Board diversity and corporate social responsibility. Journal of Business Ethics, 132(4), 641-660.

Hermalin, B. E., & Weisbach, M. S. (2003). Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature. Economic Policy Review, 9 (1) 7-26.

Hoje, J., & Harjoto, M. A. (2012). The causal effect of corporate governance on corporate social responsibility. Journal of Business Ethics, 106, 53–72.

Hong, B., Li, Z., & Minor, D. (2016). Corporate governance and executive compensation for corporate social responsibility. Journal of Business Ethics, 136, 199–213.

Jensen, M. C. (1993). The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems. The Journal of Finance. 48(3) 831-880.

Jensen, M., & Meckling, W. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.

Jizi, M. (2017). The influence of board composition on sustainable development disclosure: Board composition and sustainable development disclosure. Business Strategy and the Environment, 26 (5), 640-655.

Joseph, C., & Taplin, R. (2011). The measurement of sustainability disclosure: Abundance versus occurrence. Accounting forum, 35(1), 19-31.

Kang, Y. S., Huh, E., & Lim, d. M.-H. (2019). Effects of foreign directors’ nationalities and director types on corporate philanthropic behavior: evidence from Korean firms. Sustainability, 11(11), 1-19.

Landry, E. E., & Bosco, R. A. (2016). Recognition for sustained corporate social responsibility: Female directors make a difference. Corporate Social Responsibility and Environmental Management, 23(1), 27-36.

Linnenluecke, M. K., & Griffiths, A. (2010). Corporate sustainability and organizational culture. Journal of World Business, 45(4), 357-366.

Maas, K. (2018). Do corporate social performance targets in executive compensation contribute to corporate social performance? Journal of Business Ethics, 148(3), 573–585.

Mallette, P., & Fowler, K. L. (1992). Effects of board composition and stock ownership on the adoption of “poison pills”. Academy of Management Journal, 35, 1010–1035.

Michelon, G., & Parbonetti, A. (2012). The effect of corporate governance on sustainability disclosure. Journal of Management & Governance, 16, 477-509.

Mitchell, R. K., Agle, B. R., & Wood, D. J. (1997). Toward a theory of stakeholder identification and salience: Defining the principle of who and what really counts. The Academy of Management Review, 22(4), 853-886.

Montiel, I., & Delgado-Ceballos, J. (2014). Defining and measuring corporate sustainability: Are we there yet. Organization & Environment, 27(2), 113-139.

Munisi, G. (2019). Corporate governance and ownership structure in Sub-Saharan Africa countries. Journal of African Business, 21(3), 289-314.

Munisi, G. H., & Mersland, R. (2016). Ownership, board compensation and company performance in Sub-Saharan African countries. Journal of Emerging Market Finance, 15(2), 191–224.

Naseem; Riaz; Rehman; Ikram; Malik. (2017). Impact of board characteristics on corporate social responsibility disclosure. The Journal of Applied Business Research, 33(4), 801-810.

Neubaum, D. O., & Zahra, S. A. (2006). Institutional ownership and corporate social performance: The moderating effects of investment horizon, activism, and coordination. Journal of Management, 32(1):108-131.

Nguyen, T. T. (2020). The relationship between board of directors and sustainability reporting: An empirical study in German large listed firms. Acta Universitatis Agriculturae et Silviculturae, 68(1), 211–218.

Ning, Y., Davidson, W. N., & Wang, J. (2010). Does optimal corporate board size exist? an empirical analysis. Journal of Applied Finance, 20(2), 57-69.

Ntim, C. G., & Osei, K. (2011). The impact of corporate board meetings on corporate performance in South Africa. African Review of Economics and Finance, 2(2), 83-103.

Ntim, C. G., & Soobaroyen, T. (2013). Corporate Governance and Performance in Socially Responsible Corporations: New Empirical Insights from a Neo-Institutional Framework. Corporate Governance: An International Review, 21(5), 468-494.

Pérez-López, D., Moreno-Romero, A., & Barkemeyer, R. (2013). Exploring the relationship between sustainability reporting and sustainability management practices. Business Strategy and the Environment, 24(8), 720-734.

Post, J. E., Preston, L. E., & Sachs, S. (2002). Managing the extended enterprise: the new stakeholder view. California Management Review, 45(1), 6–28.

Raheja, C. (2005). Determinants of board size and composition: A theory of corporate boards. Journal of Financial and Quantitative Analysis, 40(2) 283-306.

Raithatha, M., & Komera, S. (2016). Executive compensation and firm performance: Evidence from Indian firms. IIMB Management Review, 23(8), 160–169.

Rashid, A., Shams, S., Bose, S., & Khan, H. Z. (2020). CEO power and corporate social responsibility (CSR) disclosure: Does stakeholder influence matter? SSRN Electronic Journal, 35(9), 1279–1312.

Samaha, K., Khlif, H., & Hussainey, K. (2015). The impact of board and audit committee characteristics on voluntary disclosure: A meta-analysis. Journal of International Accounting Auditing and Taxation, 24(C), 13-28.

Sharma, S., & Vredenburg, H. (1998). Proactive corporate environmental strategy and the development of competitively valuable organizational capabilities. Strategic Management Journal, 19(8), 729-753.

Tien, C., Chen, C.-N., & Chuang, C.-M. (2014). A study of CEO power, pay structure, and firm performance. Journal of Management & Organization, 19(4) 424–453.

Tilt, C. A., Qian, W., Kuruppu, S., & Dissanayake, D. (2021). The state of business sustainability reporting in sub-Saharan Africa: an agenda for policy and practice. Sustainability Accounting, Management and Policy Journal, 12(2), 267-296.

Vafeas, N. (1999). Board meeting frequency and firm performance. Journal of Financial Economics, 53(1), 113-142.


Refbacks

  • There are currently no refbacks.


[ISSN 0856 2253 (Print) & ISSN 2546-213X (Online)]