Firms’ characteristics, corporate governance, and the adoption of sustainability reporting: evidence from Gulf Cooperation Council countries

Purpose - The purpose of the study is to investigate the factors that influence the adoption of new sustainability reporting (SDG) and external assurance (EXTA) practices. This study also examines the relationship between sustainability reporting activity and corporate economic performance for a sample of 99 companies in Gulf Cooperation Council (GCC) countries that addressed SDGs in their sustainability reports published in 2019. Design/methodology/approach - Using a two-stage analysis, this study examines how firms’ characteristics and corporate governance variables affect SDG and economic performance, as well as the firm’s decision to adopt EXTA statements for a sample of companies in that addressed SDGs in their sustainability reports published in 2019. The authors collected data from the Global Reporting Initiative’s (GRI) Sustainability Disclosure database and the Bureau van Dijk for Orbis database. Findings - The results show that the variables firm size, profitability, big 4 auditors and government ownership significantly affect SDG and economic performance. The results also reveal that firms operating in the manufacturing sector are positively correlated with SDG and the firm’s decision to adopt EXTA statements. Furthermore, the results indicate that board independence positively affects SDGs and EXTA. Research limitations/implications - The results can be particularly relevant and timely in helping large GCC companies promote their engagement to sustainable development practices by adopting more sustainable long-term strategies and policies. The findings could also guide managers in the strategic direction to identify firms’ characteristics and corporate governance features essential to promote sustainability reporting, an increasingly important performance indicator for investors and to enhance their confidence in the capital market. The results may also have practical implications to policymakers and other regulators in GCC countries to define effective frameworks that promote sustainable development reports and the use of EXTA. Originality/value - The results make significant contributions by providing new insights to the existing literature on sustainability reporting in emerging markets by examining a unique perspective on the influence of firms’ characteristics and corporate governance features on the adoption of new sustainability reporting practices. The authors further add to the previous literature on the relationship between a firm’s economic performance and sustainable reporting by providing evidence from large companies in GCC countries, which might benefit from the adoption of multiple conceptual lenses, in this case, legitimacy and stakeholder theories. Lastly, through the empirical findings, this study provides economic validity to the 2018 joint initiative of the GRI and the United Nations Global Compact to strengthen corporate actions to achieve the United Nations SDGs.