Corporate Governance Mechanisms and ESG Reporting: Evidence from the Saudi Stock Market
Abstract
:1. Introduction
2. Literature Review and Hypotheses Development
2.1. Theoretical Framework of the Study
2.2. Corporate Governance and ESG Regulations in Saudi Arabia
2.3. Royal Family Member (BROY)
2.4. Audit Committee External Members
3. Research Methodology and Data
3.1. Data and Sample
3.2. Variables Measurements
3.2.1. Dependent Variable: ESG Reporting
3.2.2. Independent Variables
3.2.3. Control Variables
3.3. Model Specification
4. Empirical Results
4.1. Descriptive Statistics
4.2. Correlation Analysis
4.3. Regression Results and Discussion
5. Further Investigation
5.1. Endogeneity Issues
5.2. Without Winsor (OLS Regression)
5.3. Alternative Measurement of ACEXT
5.4. FGLS, PCSE and SCC Regressions Results
5.5. Exclude the Periods with Few Observations
6. Conclusions
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
References
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Sample Distribution Across Study Period | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Year | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | Total |
Freq | 7 | 17 | 23 | 23 | 21 | 25 | 24 | 26 | 27 | 13 | 206 |
Percent | 3.4 | 8.25 | 11.17 | 11.17 | 10.19 | 12.14 | 11.65 | 12.62 | 13.11 | 6.31 | 100 |
Variables | Mean | Median | Std. Dev. | Min | Max |
---|---|---|---|---|---|
ESG | 14.62 | 11.28 | 9.69 | 2.19 | 48.35 |
BROY | 0.18 | 0.00 | 0.38 | 0.00 | 1.00 |
ACEXT | 0.92 | 1.00 | 0.27 | 0.00 | 1.00 |
BMET | 6.05 | 6.00 | 2.20 | 2.00 | 16.00 |
BSIZ | 9.66 | 9.00 | 0.89 | 7.00 | 12.00 |
BIND | 0.42 | 0.36 | 0.12 | 0.20 | 1.00 |
ACIND | 0.79 | 0.80 | 0.21 | 0.33 | 1.00 |
ACMET | 6.01 | 5.50 | 2.35 | 3.00 | 23.00 |
IOGOV | 0.24 | 0.12 | 0.27 | 0.00 | 0.98 |
ROE | 0.12 | 0.13 | 0.11 | 0.28 | 0.55 |
LEV | 0.24 | 0.23 | 0.18 | 0.00 | 0.74 |
TQ | 1.39 | 1.12 | 0.74 | 0.53 | 5.75 |
LOSS | 0.08 | 0.00 | 0.27 | 0.00 | 1.00 |
FSIZE | 17.83 | 17.89 | 1.42 | 14.43 | 21.12 |
FSIZE (000) | 120,600,000 | 585,98,352 | 154,300,000 | 1,848,221 | 1,481,000,000 |
Variables | (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | (10) | (11) | (12) | (13) | (14) | VIF |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(1) ESG | 1.000 | 2.97 | |||||||||||||
(2) BROY | 0.066 | 1.000 | 1.38 | ||||||||||||
(3) ACEXT | 0.060 | −0.296 *** | 1.000 | 1.37 | |||||||||||
(4) BMET | −0.086 | −0.168 ** | 0.092 | 1.000 | 1.68 | ||||||||||
(5) BSIZE | 0.038 | −0.194 *** | 0.120 * | −0.034 | 1.000 | 1.70 | |||||||||
(6) BIND | −0.066 | −0.270 *** | 0.174 ** | 0.087 | 0.185 *** | 1.000 | 1.47 | ||||||||
(7) ACIND | 0.035 | −0.069 | 0.254 *** | −0.134 * | 0.041 | 0.214 *** | 1.000 | 1.84 | |||||||
(8) ACMET | −0.042 | −0.214 *** | 0.153 ** | 0.463 *** | 0.057 | 0.040 | −0.048 | 1.000 | 1.50 | ||||||
(9) IOGOV | 0.221 *** | −0.194 *** | 0.073 | 0.449 *** | −0.398 *** | −0.095 | −0.192 *** | 0.317 *** | 1.000 | 3.26 | |||||
(10) ROE | −0.027 | −0.087 | 0.232 *** | −0.163 ** | 0.175 ** | 0.024 | 0.066 | 0.007 | −0.133 * | 1.000 | 3.64 | ||||
(11) LEV | 0.042 | 0.173 ** | −0.215 *** | −0.026 | −0.315 *** | −0.269 *** | −0.370 *** | −0.186 *** | 0.071 | −0.418 *** | 1.000 | 1.89 | |||
(12) TQ | −0.001 | 0.118 * | −0.117 * | −0.182 *** | 0.019 | −0.100 | −0.151 ** | −0.053 | −0.191 *** | 0.545 *** | −0.040 | 1.000 | 2.41 | ||
(13) LOSS | −0.089 | 0.057 | −0.187 *** | 0.111 | 0.074 | 0.029 | −0.142 ** | 0.089 | −0.137 ** | −0.587 *** | 0.232 *** | −0.113 * | 1.000 | 2.20 | |
(14) FSIZE | 0.193 *** | −0.130 * | 0.074 | 0.265 *** | −0.070 | −0.122 * | 0.193 *** | 0.181 *** | 0.596 *** | −0.173 ** | −0.200 *** | −0.443 *** | −0.144 ** | 1.000 | 2.89 |
Independent Variables | Expected Sign | Coef. | t-Value | p-Value |
---|---|---|---|---|
BROY | + | 6.318 | 3.26 | 0.001 *** |
ACEXT | + | 4.034 | 2.18 | 0.030 ** |
BMET | + | −0.822 | −2.76 | 0.006 *** |
BSIZ | + | 2.907 | 2.65 | 0.009 *** |
BIND | ? | 0.045 | 0.87 | 0.385 |
ACIND | + | −2.685 | −0.56 | 0.575 |
ACMET | + | −0.476 | −1.35 | 0.178 |
IOGOV | + | 0.159 | 3.51 | 0.001 *** |
ROE | + | −0.069 | −0.68 | 0.496 |
LEV | − | 0.035 | 0.80 | 0.425 |
TQ | + | 0.830 | 1.13 | 0.259 |
LOSS | − | −4.041 | −1.27 | 0.206 |
FSIZE | + | 0.214 | 0.30 | 0.763 |
Constant | ? | −22.95 | −2.09 | 0.038 ** |
R2 | 0.360 | |||
N | 206 | |||
Year-effect | Included | |||
Prob > F | <0.001 *** |
Independent Variables | Expected Sign | Coef. | t-Value | p-Value |
---|---|---|---|---|
BROY | + | 7.025 | 3.30 | 0.001 *** |
ACEXT | + | 3.719 | 1.68 | 0.095 * |
BMET | + | −0.741 | −2.31 | 0.022 ** |
BSIZ | + | 2.301 | 2.15 | 0.033 ** |
BIND | ? | 0.089 | 1.94 | 0.054 * |
ACIND | + | −7.101 | −1.62 | 0.108 |
ACMET | + | −0.457 | −1.33 | 0.185 |
IOGOV | + | 0.112 | 2.40 | 0.018 ** |
ROE | + | −0.064 | −0.69 | 0.493 |
LEV | − | 0.055 | 1.10 | 0.272 |
TQ | + | 0.913 | 0.87 | 0.385 |
LOSS | − | −7.058 | −2.11 | 0.036 ** |
FSIZE | + | 1.030 | 1.56 | 0.120 |
Constant | ? | −30.617 | −2.01 | 0.046 ** |
R2 | 0.389 | |||
N | 169 | |||
Year-effect | Included | |||
Prob > F | <0.001 *** |
Independent Variables | Expected Sign | Coef. | t-Value | p-Value |
---|---|---|---|---|
BROY | + | 6.500 | 3.38 | 0.001 *** |
ACEXT | + | 4.120 | 2.21 | 0.029 ** |
BMET | + | −0.856 | −2.80 | 0.006 *** |
BSIZ | + | 2.698 | 2.70 | 0.008 *** |
BIND | ? | 0.048 | 1.15 | 0.252 |
ACIND | + | −2.921 | −0.61 | 0.539 |
ACMET | + | −0.096 | −0.23 | 0.815 |
IOGOV | + | 0.146 | 3.65 | 0.001 *** |
ROE | + | −0.067 | −0.70 | 0.483 |
LEV | − | 0.043 | 1.03 | 0.304 |
TQ | + | 0.704 | 0.93 | 0.355 |
LOSS | − | −4.687 | −1.52 | 0.131 |
FSIZE | + | 0.253 | 0.41 | 0.683 |
Constant | ? | −23.093 | −2.09 | 0.038 ** |
R2 | 0.353 | |||
N | 206 | |||
Year-effect | Included | |||
Prob > F | <0.001 *** |
Independent Variables | Expected Sign | Coef. | t-Value | p-Value |
---|---|---|---|---|
BROY | + | 6.077 | 3.21 | 0.002 *** |
ACEXTPCT | + | 8.634 | 1.97 | 0.050 ** |
BMET | + | −0.785 | −2.63 | 0.009 *** |
BSIZ | + | 2.798 | 2.70 | 0.008 *** |
BIND | ? | 0.062 | 1.18 | 0.241 |
ACIND | + | −6.483 | −1.12 | 0.264 |
ACMET | + | −0.543 | −1.55 | 0.123 |
IOGOV | + | 0.163 | 3.60 | 0.001 *** |
ROE | + | −0.092 | −0.83 | 0.407 |
LEV | − | 0.024 | 0.54 | 0.591 |
TQ | + | 1.015 | 1.14 | 0.257 |
LOSS | − | −3.999 | −1.30 | 0.195 |
FSIZE | + | −0.080 | −0.12 | 0.908 |
Constant | ? | −14.902 | −1.30 | 0.194 |
R2 | 0.372 | |||
N | 206 | |||
Year-effect | Included | |||
Prob > F | <0.001 *** |
Independent Variables | FGLS | PCSE | SCC | |||
---|---|---|---|---|---|---|
Coef. | t-Value | Coef. | z-Value | Coef. | t-Value | |
BROY | 6.318 | 3.81 *** | 6.318 | 3.43 *** | 6.318 | 6.42 *** |
ACEXT | 4.034 | 1.72 * | 4.034 | 2.3 ** | 4.034 | 1.9 * |
BMET | −0.822 | −2.43 ** | −0.822 | −2.73 *** | −0.822 | −2.54 ** |
BSIZ | 2.907 | 3.50 *** | 2.907 | 2.72 *** | 2.907 | 2.72 ** |
BIND | 0.045 | 0.75 | 0.045 | 0.82 | 0.045 | 1.27 |
ACIND | −2.685 | −0.76 | −2.685 | −0.57 | −2.685 | −0.65 |
ACMET | −0.476 | −1.46 | −0.476 | −1.48 | −0.476 | −1.04 |
IOGOV | 0.159 | 4.39 *** | 0.159 | 3.78 *** | 0.159 | 5.39 *** |
ROE | −0.069 | −0.71 | −0.069 | −0.72 | −0.069 | −1.08 |
LEV | 0.035 | 0.85 | 0.035 | 0.84 | 0.035 | 1.26 |
TQ | 0.83 | 0.75 | 0.83 | 1.11 | 0.83 | 1.57 |
LOSS | −4.041 | −1.36 | −4.041 | −1.41 | −4.041 | −1.39 |
FSIZE | 0.214 | 0.34 | 0.214 | 0.32 | 0.214 | 0.33 |
Constant | −22.95 | −1.61 | −22.95 | −2.06 ** | −22.95 | −2.4 ** |
Year | Included | Included | Included | |||
No of obs | 206 | 206 | 206 | |||
Wald chi2 (6) | 116.106 | 122.42 | 7495.84 | |||
Prob > chi2 | <0.001 *** | <0.001 *** | <0.001 *** |
Independent Variables | Expected Sign | Coef. | t-Value | p-Value |
---|---|---|---|---|
BROY | + | 7.225 | 3.63 | 0.001 *** |
ACEXT | + | 5.174 | 2.42 | 0.017 ** |
BMET | + | −1.030 | −3.04 | 0.003 *** |
BSIZ | + | 3.378 | 2.81 | 0.006 *** |
BIND | ? | 0.037 | 0.62 | 0.535 |
ACIND | + | −5.688 | −1.04 | 0.299 |
ACMET | + | −0.233 | −0.56 | 0.576 |
IOGOV | + | 0.170 | 3.49 | 0.001 *** |
ROE | + | −0.059 | −0.51 | 0.611 |
LEV | − | 0.038 | 0.78 | 0.438 |
TQ | + | 0.231 | 0.24 | 0.814 |
LOSS | − | −4.497 | −1.32 | 0.187 |
FSIZE | + | −0.129 | −0.16 | 0.873 |
Constant | ? | −20.195 | −1.44 | 0.152 |
R2 | 0.374 | |||
N | 169 | |||
Year-effect | Included | |||
Prob > F | <0.001 *** |
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Bamahros, H.M.; Alquhaif, A.; Qasem, A.; Wan-Hussin, W.N.; Thomran, M.; Al-Duais, S.D.; Shukeri, S.N.; Khojally, H.M.A. Corporate Governance Mechanisms and ESG Reporting: Evidence from the Saudi Stock Market. Sustainability 2022, 14, 6202. https://doi.org/10.3390/su14106202
Bamahros HM, Alquhaif A, Qasem A, Wan-Hussin WN, Thomran M, Al-Duais SD, Shukeri SN, Khojally HMA. Corporate Governance Mechanisms and ESG Reporting: Evidence from the Saudi Stock Market. Sustainability. 2022; 14(10):6202. https://doi.org/10.3390/su14106202
Chicago/Turabian StyleBamahros, Hasan Mohamad, Abdulsalam Alquhaif, Ameen Qasem, Wan Nordin Wan-Hussin, Murad Thomran, Shaker Dahan Al-Duais, Siti Norwahida Shukeri, and Hytham M. A. Khojally. 2022. "Corporate Governance Mechanisms and ESG Reporting: Evidence from the Saudi Stock Market" Sustainability 14, no. 10: 6202. https://doi.org/10.3390/su14106202