Corporate Governance Mechanisms and ESG Reporting: Evidence from the Saudi Stock Market

Abstract

The code of corporate governance in Saudi Arabia places a greater focus on social responsibility initiatives by Saudi companies and the reporting of such activities to the community. The current study examines the relationship between corporate governance mechanisms and environ-mental, social, and governance (ESG) disclosures amongst Saudi companies. In particular, we extend previous studies by covering unique Saudi corporate governance mechanisms (i.e., the presence of members of the royal family on the board (BROY) and of external members on the audit committee (ACEXT)), and their impact on ESG disclosure. Using 206 company-year observations for Saudi listed companies spanning the period 2010 to 2019, we find the presence of BROY and ACEXT has a positive and significant association with ESG disclosure. The findings of this study may help policymakers to develop regulations regarding corporate governance mechanisms to enhance ESG disclosure.