Corporate governance mechanisms sustainability performance and sustainability disclosure quality
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2017-07-11
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en
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Abstract
This study examines the relationship between corporate governance mechanisms, sustainability performance and sustainability disclosure quality. Firms are increasingly expected to disclose sustainability reports in which they report on their environmental and social impacts. We argue that higher levels of corporate governance pressure lead to better corporate sustainability performance and higher sustainability disclosure quality. Using structural equation modeling with a unique panel data set of 91 Dutch firms that have disclosed sustainability reports during the years 2012-2016, our results show that sustainability performance and the corporate governance mechanisms board strength, stakeholder engagement, media coverage, analyst coverage and external assurance play a significant role in explaining the variation in the quality of sustainability reports. The results support socio-political theories, which state that firms that are under high social and political pressures are more likely to produce high-quality sustainability reports. The anticipated effects of the explanatory variables on corporate sustainability performance are not consistently found, however. Our findings indicate that firms which are under high public pressure increase the quality of their sustainability reports, rather than directly improve the underlying sustainability performance. They suggest a need for stricter regulatory requirements to force companies to become more accountable for their sustainability performance.
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Faculteit der Managementwetenschappen