Sustainability Reporting (SR) in Sub-Saharan Africa (SSA) : a corporate governance and ownership structure perspective

Abstract

The level of sustainability reporting (SR) in sub-Saharan Africa (SSA) is still low and unsatisfactory. Nonetheless, studies on corporate governance and SR in SSA are limited. The immaturity of the capital markets of the SSA limits the acquisition of valid and reliable sustainability data. Most studies on corporate governance and SR are therefore, largely within the context of businesses in the developed world with matured capital markets. There is also evidence of limited emphasis on the boundary condition of ownership structure in the relationship between corporate governance and sustainability reporting. The aim of this study was to investigate the moderating role of ownership structure in the extent to which the corporate governance practices of businesses in SSA promote SR. The study focused on SSA's publicly listed non-financial firms as of 31 December 2021. STATA 14.1 and GMM were used to analyze secondary data. The Arellano-Bond dynamic panel-data estimation method was applied to a balanced panel of 1,969 observations from 275 groups spanning 2012 to 2021. The study revealed ownership structure notably shaped corporate governance's effect on sustainability disclosure in SSA listed businesses. In addition it was found that government ownership bolstered board independence's environmental sustainability reporting (ESR) impact, while foreign ownership weakened Board female gender diversity (BFGD) influence. Board independence enhanced social sustainability reporting (SSR), but government ownership weakened audit committee attributes' SSR link. Foreign ownership amplified the connection between audit committee size and SSR, but weakened it for sustainability committee independence. BFGD, board independence, independent remuneration, and sustainability committees positively correlated with ESR. Conversely, larger remuneration committees and more sustainability meetings negatively related to reduced ESR. It is therefore imperative for SSA firms to establish standard CSR/ESG boards for functional effectiveness. In a nutshell, the influence of corporate governance on reporting is moderated by ownership structure, highlighting the importance of tailored ownership arrangements to enhance sustainability reporting. Policies should prioritize environmental and social reporting, as it receives less emphasis compared to traditional financial reporting.