read this review of literature study #1 <Corporate Governance Characteristics and Environmental Sustainability Affect the Business Performance among Listed Saudi Company
by Nasareldeen Hamed Ahmed https://doi.org/10.3390/su16198436 1. Introduction 
Investors and stakeholders are putting increasing pressure on businesses to be more accountable for the impact of their operations and decisions on environmental sustainability in response to climate change, biodiversity loss, deforestation, resource depletion, water scarcity, agricultural land degradation, and pollution [1,2]. In the absence of strict mandatory regulation of sustainability reporting, Companies choose whether and to what degree to publish Environmental Sustainability (ESG) information in designated sustainability reports, as well as whether and how closely these reports follow generally recognized sustainability reporting standards and guidelines [3]. The signaling hypothesis states that managers decide to talk about their sustainability practices with stakeholders and shareholders to draw attention to the company’s outstanding sustainability performance and to obtain competitive benefits, such as simpler financing [4,5], as well as cheaper equity capital expenses [3,6]. Compliance with sustainability reporting standards (SRS) can further increase stakeholders’ and shareholders’ confidence in the accuracy and truthfulness of the company’s voluntary sustainability disclosures by proving that a firm takes sustainable development seriously [7]. However, the legitimacy hypothesis contends that voluntary sustainability reporting may also be advantageous for environmentally conscious businesses susceptible to external pressures and legitimacy issues, such as solar or clean energy providers [8]. To lessen the negative effects of poor environmental sustainability on their legitimacy and brand recognition in an environmental sustainability-related area, company management uses sustainability reporting in business as a tool to manage investor and stakeholder attitudes and expectations [9,10,11]. However, hiding or neglecting to disclose inadequate CSP will reduce the quality of sustainable reporting because it is not presented honestly in all material aspects (SRQ) [12,13,14]. Environmental sustainability refers to appropriate interactions with the environment to ensure long-term environmental quality and to prevent the depletion or degradation of natural resources [15]. This entails protecting the environment from deterioration, preserving ecological equilibrium, and maintaining natural resources. Acknowledging the interdependence of social, economic, and environmental systems, this notion seeks to foster equilibrium between human necessities and the conservation of the environment for posterity [16].
As part of its aggressive efforts to diversify its economy and lessen its dependence on oil, Saudi Arabia has prioritized environmental sustainability and renewable energy [17]. Saudi Arabia’s Vision 2030 strives for environmental sustainability through the use of renewable energy sources and reduction in carbon emissions, such as solar and wind power, conserving various natural resources, and motivating businesses to support the realization of Vision 2030 [18]. Additionally, the nation wants to advance sustainable methods in a variety of sectors, including urban planning, agriculture, and water management [19].
Businesses may choose to actively participate in environmentally responsible operations because of two main factors: first, to outperform competitors by obtaining the necessary resources [11,20]; second, to obtain support from the public for their activities to give them legitimacy [21,22]. Finally, stakeholder theory contends that a company’s reputation and image can be boosted by demonstrating higher accountability and transparency through a greater commitment to good environmental practices, thereby balancing the opposing interests of several stakeholders [11,23]. Thus, theories suggest that well-designed governance structures effectively protect the interests of several stakeholders, which may improve the environmental performance of firms [24].
Corporate governance is the body of laws, norms, and guidelines governing how a company runs. It includes systems used to manage and control businesses and other organizations [25]. Transparency, accountability, fairness, responsibility, independence, compliance, and strategic vision are essential traits for effective company governance [26]. An audit committee is necessary to ensure that internal controls and financial reporting are accurate within the corporation [27]. A corporation can boost its performance, improve its reputation, and foster stakeholder trust by implementing these traits in its governance system [28]. Corporate performance is an assessment of a company’s success in achieving its goals and objectives, which are often planned [29]. It includes a range of operational components such as a company’s profitability, efficiency, ability to generate cash flows, market share, and overall industry competitiveness [30]. Key performance indicators (KPIs), such as revenue growth, profitability, return on investment, cash inflow growth, market share, customer happiness, and employee productivity, are often analyzed to evaluate a company’s performance [31,32]. To evaluate the success of a company’s strategies and management choices, stakeholders such as investors, shareholders, employees, and customers periodically evaluate the company’s performance [33]. Strong business performance is typically associated with success and the ability to achieve sustainable long-term profitability and liquidity growth over the long-term [32,34]. A company’s substandard performance is also a sign of operational difficulties, strategic problems, or inefficiency that needs to be fixed to raise the company’s performance and enhance its liquidity [35].
The intersection of corporate governance and environmental sustainability practices is the area of unmet research needs for this article because little is known about the effects of particular corporate governance mechanisms (such as ownership structure, diversity, and board independence) on environmental sustainability practices in Saudi businesses. This may yield fresh insights into how governance features affect the uptake and efficacy of certain approaches. Recent legal changes and instructions from Saudi authorities (such as Saudi Vision 2030 and the Kingdom’s growing focus on sustainability) may have altered the corporate governance landscape in addition to the impact of changes on business performance. The manner in which these modifications affect the interplay among corporate governance, environmental sustainability, and company performance is not well understood.
Based on the above disunion, the objective is to evaluate and optimize the characteristics of the audit committee, such as its size, independence, frequency of meetings, and member commitment, to enhance financial transparency and corporate governance. Moreover, this study aimed to examine the relationship between ESG and BuPE. It attempts to improve the dependability and accuracy of financial reporting by placing a robust oversight framework and promoting effective communication, independence, and competence among committee members.
Our work contributes to existing studies on the audit committee characteristics as a mechanism for corporate governance and sustainability, as well as their impact on company performance in several ways. First, the audit committee and the effectiveness of board oversight on environmental sustainability have been recognized in previous research, but the underlying mechanisms are still poorly understood empirically [36]. This is particularly true with regard to CG’s implications for environmental sustainability, which are only now starting to garner scholarly interest from researchers [37].
Second, in contrast to studies that focus on variables related to corporate sustainability performance (CSP), SRQ, or SRS, we examine the effects of the determinants of audit committee characteristics and environmental sustainability, considering their interdependence. Thus, we add to the literature by revealing the potential indirect effects of sustainability reporting processes and performance. Third, previous studies have investigated how corporate governance (CG) processes influence environmental sustainability [38]. Environmental sustainability was measured through text analysis using complex self-created scores that have proven difficult to implement in previous research. The most accurate and comparable indicators for this study come from the Transparency Benchmark, which is based on objective research evaluating the impact of sustainability and audit committees on performance. To ascertain whether Saudi businesses adhered to sustainability reporting standards, we collected information from the Sustainability Disclosure Database of the Global Reporting Initiative (GRI). Finally, most research on the variables influencing SRQ and ESG is cross-sectional [39], which poses a problem in terms of causality. Our approach uses panel data that allow us to infer the causes.
This study sought to ascertain the effects of environmental sustainability practices and corporate governance traits on business performance among Saudi-listed companies. The research design included research methodology, data collection and analysis, result extraction, and the provision of useful and practical recommendations [40]. The main inquiry for the research was [41] What effect do corporate governance characteristics and environmental sustainability practices have on the financial performance of Saudi listed companies? The following sections explain the theoretical framework of the article, a section on methodology and analysis, from which the results are drawn and discussed, and a proposal for future research.
2. Literature Review and Research Hypothesis
Saudi Arabia’s population has expanded by 1.62% annually over the past 40 years because of a population explosion. Saudi Arabia, with 35,013,414 people, was the fourth-largest Arab country in 2018 [42]. In addition, due to the recent expansion of the Saudi economy [43], there are a large number (more than 200 companies) of companies listed in the Saudi market that publish their information annually [44]. To our knowledge, there are no previous studies examining corporate governance and environmental sustainability and their impact on Saudi business performance. Thus, the main problem of this research is represented by the following question: Do corporate governance mechanisms obligate companies to publish sustainability reports on a regular basis to help enhance environmental sustainability and, thus, the performance of Saudi businesses?
Saudi Arabia’s corporate governance code prioritizes social responsibility programs undertaken by Saudi businesses, and the public reporting of these endeavors [45]. Many previous studies and the literature have concluded that corporate governance and environmental sustainability positively affect company performance [46,47]. Corporate governance encourages sustainable actions [48].
A company’s reputation is improved, and the risk of legal and regulatory repercussions decreases when the audit committee complies with pertinent legislation and standards, which has a beneficial effect on business performance [49,50]. Non-compliance can have negative effects on a company’s reputation and possibly impair its capacity to conduct business, including financial and legal ramifications [51].
The field of sustainable or responsible business practices serves as a foundation for several theories that investigate the relationship between environmental sustainability and corporate governance traits in relation to company performance [52]. Several frameworks and theories may be useful for understanding this relationship [53]. First, stakeholder theory states that businesses must consider the interests of all parties, including consumers, employees, shareholders, and the general public [54]. Second, the interaction between principals, such as shareholders and agents, such as firm executives, is the main emphasis of agency theory [55]. This implies that corporate governance practices, such as executive salaries and board structures, are intended to balance the interests of principals and agents [25].
Theoretical backgrounds:
Agency, stewardship, resource dependence, and institutional theories are theoretical frameworks and historical contexts used to study the impact of corporate governance on company performance [56]. The idea of environmental sustainability is supported by many academic frameworks, including stakeholder theory, triple bottom line (TBL) theory, natural resource-based view (NRBV), and legitimacy theory [57]. Contemporary research and empirical evidence on corporate governance and business performance frequently investigate how specific governance characteristics, such as board diversity, CEO duality, and ownership structure, affect performance measures (e.g., return on assets and market valuation) [58]. In Saudi Arabia, research has yielded varied results, with some claiming that corporations with superior governance processes have greater market valuations, while others have found no such association [59]. This could be attributed to different levels of governance maturity and enforcement across businesses. Environmental sustainability and business performance: Empirical research in numerous markets, including Saudi Arabia [60], shows that enterprises devoted to environmental sustainability frequently perform better financially, particularly in the long run. These benefits can result from cost reductions (e.g., energy efficiency), improved brand reputation, and fewer regulatory concerns [61].
2.1. Audit Committee Characteristics and Business Performance
The board of directors’ subcommittee, which oversees the management of the company’s financial reporting, is called the audit committee. The audit committee oversees several processes, such as facilitating communication between the board and the external auditor and financial reporting, including internal controls [62,63]. The performance of a company’s operations can be significantly impacted by the quality of its audit committee [64]. Maintaining consistent and efficient correspondence with external auditors can improve the audit procedure and bolster the dependability of financial statements [50,65]. This promotes cooperation, which may result in improved risk assessment and reduction [66]. Financial and operational concerns are proactively identified and addressed by an efficient audit committee [32,67]. This preventive strategy can lessen the effects of possible problems and improve business performance [68]. The quality of an audit committee can have a significant impact on how well a corporation performs [69]. A competent, impartial, and well-run audit committee has a greater chance of supporting accurate financial reporting, efficient risk management, and improved corporate governance, all of which can have a favorable effect on business outcomes [70].
The findings of a few earlier studies supported the notion that corporate environmental social responsibility significantly improves business success [68,69,71]. The findings of a few earlier studies suggest that having a director on both audit and nomination committees is important and has a negative impact on profitability [64]. However, earlier research found no meaningful correlation between experience and business performance [69].
2.1.1. Audit Committee Size and Business Performance
According to the best standards, the audit committee’s size and makeup should match the complexity and requirements of the company [72]. A smaller audit committee would be more flexible and effective in reaching decisions [73]. It is simpler to organize and communicate when there are fewer participants [74]. However, a larger committee may include a wider range of knowledge and viewpoints, which could improve the standard of oversight [75]. A smaller committee would find it difficult to include all areas of expertise required for efficient financial supervision [76]. A broader committee may have members with a range of experiences and backgrounds, offering a more thorough understanding of risk and financial management challenges [77]. Smaller committees may have simpler coordination and communication, which accelerates decision-making [78]. Larger groups could have trouble coordinating and communicating effectively, which could delay the decision-making process [79]. Smaller committee members might have more work to do, which could make it harder for them to carefully review financial data [80]. In larger committees, workload distribution may be easier to manage, thus allowing members to concentrate on their areas of expertise [81].
The results of earlier studies show a statistically significant and favorable relationship between the size of the audit committee and the organization’s success [69,82]. A few earlier studies’ findings showed that audit committee size had no appreciable effect on a company’s performance. For example, [83]. Hence, the following hypothesis was formulated based on the conversation and analysis of earlier literature:
H1.  There is a positive relationship between the size of the audit committee and business performance.
2.1.2. Audit Committee Independence and Business Performance
An independent audit committee is essential to guarantee impartiality and objective supervision, and an independent audit committee is essential [84]. Since independent members are less likely to be involved in conflicts of interest, the financial reporting process may be more accurate and open [85]. A weakened supervision process caused by a lack of independence could result in false financial reporting and lower investor confidence [86]. Smaller committees may find it easier to preserve independence and objectivity because there are fewer possible conflicts of interest [87]. A larger committee size may make it more difficult for members to remain impartial and independent [88].
According to earlier research, there is a strong positive correlation between profitability and independent committee members [64,69]. Earlier research findings did not indicate that audit committee independence had any additional impact on financial performance [89]. Thus, in light of the discussion and examination of previous literature, the following hypothesis is developed:
H2.  The independence of the audit committee improves business performance.
2.1.3. Audit Committee Meeting and Business Performance
The audit committee guarantees the dependability and correctness of financial statements [90]. Sustaining the confidence of creditors, investors, and other stakeholders is contingent upon this [91]. Companies that present their finances accurately and transparently have a higher chance of drawing investment and keeping their names in the industry [92]. The literature utilizes meeting frequency as a proxy to quantify audit committee activity, and the number of meetings represents the effectiveness of the committee’s monitoring [69,93]. Regularly meeting audit committees have a greater understanding of a company’s situation [69,94].
According to earlier research findings, there is a strong explanatory relationship between the performance of market-based enterprises and audit committee meetings [95]. According to the findings of a few earlier studies, the performance of the company and audit committee meetings are statistically significantly negatively correlated [71]. Earlier research on the frequency of audit committee meetings failed to find a meaningful correlation with business success [69,83,89]. Thus, the following hypothesis was created in light of the discussion and analysis of earlier literature.
H3.  There is a negative relationship between the frequency of audit committee meetings and business performance.
2.1.4. Audit Committee Commitment and Business Performance
A devoted audit committee ensures that financial statements are reliable and accurate. Consequently, this strengthens a company’s financial reporting trustworthiness [96]. The committee’s commitment to understanding hazards plays a role in their identification and reduction and supervises the business’s risk management procedures [97]. Thus, total business resilience may improve [98]. An enthusiastic audit committee makes sure the company abides by all relevant laws, regulations, and corporate governance standards [99]. The committee’s dedication to keeping an eye on and assessing internal controls aids in the prevention of financial reporting fraud and errors [100]. It is crucial to remember that there are many moving parts and a complicated relationship between the AC’s dedication to the audit committee and business performance [25]. The success of a company can benefit from an engaged audit committee [84]. As a result, the following hypothesis was developed in light of previous literature’s analysis and discussion:
H4.  There is a positive relationship between audit committee commitment and business performance.
2.2. Environmental Sustainability and Business Performance
Institutional theory examines how societal norms, beliefs, and expectations affect and are influenced by organizations [101]. Within the framework of environmental sustainability, the institutional theory posits that proficient corporate governance methodologies are consistent with societal norms regarding conscientious and enduring business conduct, thus augmenting favorable business outcomes [102].
A company’s reputation, long-term survival, and many other aspects of its operations and performance can be significantly affected by environmental sustainability [98]. Over time, adopting environmental sustainability practices, such as waste reduction strategies or energy-efficient technologies, can lead to significant cost savings [103]. Reducing waste leads to lower disposal costs, whereas using renewable energy sources can reduce energy prices and improve company performance [104]. Customers have become more aware of environmental sustainability issues and often choose companies that demonstrate a strong commitment to environmental sustainability [105]. By implementing environmentally friendly measures, companies attract environmentally conscious customers, thus improving their performance [106]. Companies with increasingly stringent environmental standards are subject to fines, penalties, or other negative impacts [107]. Companies must stay ahead of regulatory requirements and reduce potential legal and financial risks by implementing environmental sustainability practices and improving their performance [108]. Adopting environmentally responsible practices helps companies expand their existing customer base and reach new markets as sustainability becomes a top priority for consumers and companies globally, both generally and specifically in Saudi Arabia [109]. Certain sectors can require or comply with sustainability certifications to enter new markets or supply networks [110].
According to previous studies [111,112], investors boost a company’s social and environmental performance once stocks show financial returns on social and environmental advancements. Many previous studies have concluded that there is a positive relationship between environmental sustainability practices and company performance [104,106,108,111,112,113]. Few prior studies have yielded evidence to substantiate the association between environmental sustainability and business performance [98]. The association between environmental sustainability and company performance has been discussed previously. In light of this, the authors propose the following hypothesis:
H5.  There is a positive relationship between environmental sustainability and business performance.> study #2 < Board Composition and Environmental, Social, and Governance Reporting: Impact of Foreign and Busy Directors in Saudi-Listed Firms
by Abdulaziz S. Al Naim and Abdulrahman Alomair
 https://doi.org/10.3390/su16208985 Abstract
This study investigates the impact of board composition, specifically the presence of non-Saudi members and board busyness, on environmental, social, and governance (ESG) disclosure among Saudi-listed companies, an area of increasing importance in the context of global sustainability and corporate responsibility. As businesses face growing pressures to enhance transparency and accountability, understanding the factors that influence ESG reporting becomes crucial. This research specifically focuses on the presence of non-Saudi members and board busyness, examining how these characteristics affect ESG disclosures amidst recent corporate governance reforms in Saudi Arabia. Utilizing a balanced panel dataset of 40 non-financial firms covering the period from 2017 to 2022, we aim to understand how these board characteristics influence ESG reporting in the context of recent corporate governance reforms in Saudi Arabia. Our findings indicate that the presence of non-Saudi board members and board busyness significantly enhance ESG disclosure, while board independence shows no significant relationship. The 2017 corporate governance reforms strengthened the impact of non-Saudi members and busy directors on ESG practices, highlighting the importance of regulatory frameworks in promoting sustainability. This study provides empirical evidence from an emerging market and offers practical implications for policymakers, managers, and investors.
Keywords: ESG disclosure; corporate governance; board composition non-Saudi board members; board busyness; Saudi Arabia; corporate sustainability; regulatory reforms; emerging markets
1. Introduction
In recent years, sustainable development approaches have gained prominence among publicly listed companies and their stakeholders. The World Commission on Environment and Development (1987) defines sustainable development as development that meets current needs without compromising the ability of future generations to meet their own needs [1]. Consequently, companies are increasingly adopting ESG policies and engaging in ESG-related practices to ensure sustainable business operations [2]. ESG frameworks help companies balance their commercial and social objectives while efficiently using limited resources. Moreover, ESG considerations extend beyond shareholders to include the interests of all stakeholders, incorporating societal, environmental, and ethical dimensions [3]. Despite this, ESG reporting remains inconsistent across different companies, prompting numerous studies aimed at understanding the factors that determine a firm’s commitment to corporate social responsibility (CSR).
Prior research extensively documents the benefits of ESG disclosure for companies and their stakeholders. The authors of ref. [4] posit that ESG disclosure serves as a strategic tool to enhance corporate reputation and improve access to financial resources. Empirical studies indicate that companies with higher ESG performance tend to disclose more information to signal their credibility and trustworthiness, thereby solidifying their image as responsible corporate citizens. This positive perception among investors and stakeholders can lead to competitive advantages and enhance company performance and value [5]. Furthermore, ESG reporting helps legitimize a company in the eyes of consumers, providing additional competitive benefits [6,7,8]. In relation to the agency problem, ESG disclosure reduces information asymmetry between company insiders and stakeholders, addressing potential conflicts of interest [9,10].
Corporate governance is tasked with balancing economic, social, and environmental issues [8,11]. Structures such as the board of directors and the audit committee are established to monitor and control managers’ decisions and company activities, particularly those involving community and societal engagement, to provide benefits to stakeholders. The board of directors, as a primary mechanism of corporate governance, oversees executives and ensures that stakeholders’ needs are met. The effectiveness of the board’s monitoring duties heavily relies on its structure, where board members’ characteristics may drive managers towards high levels of integrity, transparency, and disclosure [12,13].
The context of Saudi Arabia presents an opportunity to explore the relationship between the presence of foreign members on boards, board busyness, and ESG performance. Saudi corporate governance has undergone significant reform, particularly with the introduction of the 2017 corporate governance code, which mandated comprehensive disclosure of board characteristics. These reforms are part of broader efforts under Saudi Vision 2030 to attract foreign investment and transition from an oil-based economy to a more diversified one. This makes this study the first to examine this relationship within Saudi-listed firms after the recent reforms. Besides that, this study contributes to the current literature. First, it enriches the growing body of research on corporate governance and ESG disclosure in an emerging market, specifically Saudi Arabia, by empirically examining the connection between board composition of non-Saudi members and busy directors and ESG disclosure. Previous studies have yielded mixed and ambiguous results regarding this connection [14,15,16], highlighting the need for further investigation to better understand this relationship. Second, this research adds to the prevailing evidence on the link between national bodies and companies’ board structures and ESG practices, particularly examining how the Saudi Capital Market Authority influences ESG practices and disclosures. To date, there is limited evidence on the role of foreign and busy directors in shaping the ESG disclosure, making this study a valuable addition to the literature. Third, while most prior studies on corporate governance and ESG have focused on developed markets with well-established governance frameworks, our study provides insights into an emerging market with different regulatory and cultural contexts. This helps fill the gap in empirical work on ESG in emerging countries. Lastly, our findings offer various implications for regulators, policymakers, management of listed companies, and investors, providing a comprehensive understanding of the drivers of effective ESG governance.
This study aims to investigate the relationship between the presence of foreign members on boards, board busyness, and ESG performance due to the increasing importance of corporate sustainability practices. Corporate sustainability encompasses a company’s efforts to operate in an environmentally and socially responsible manner while ensuring long-term economic viability. Effective governance structures, particularly the composition and functioning of the board of directors, play a critical role in shaping these sustainability efforts. The inclusion of foreign board members can enhance decision-making by bringing diverse perspectives that contribute to innovative solutions and strategies for sustainability. These members may introduce global best practices in ESG, helping companies align with international standards and expectations, which can significantly improve the company’s reputation and credibility in the global market. Conversely, board busyness, defined by the number of board memberships held by directors, may negatively impact ESG oversight. Busy directors may face time constraints that hinder their ability to effectively monitor and guide the company’s sustainability initiatives, potentially leading to inadequate resource allocation for ESG activities. Understanding these dynamics is crucial as it can identify key drivers of effective ESG governance, inform corporate governance policies, and contribute to strategies that maximize stakeholder value through enhanced sustainability practices. Given the growing emphasis on corporate sustainability, this research will provide valuable insights for companies, policymakers, and stakeholders committed to advancing responsible corporate behavior.
The study analyzes a sample of 240 firm-year observations over the period from 2017 to 2022, using a fixed effects regression model. The finding of this study indicate that the presence of non-Saudi board members and board busyness are significantly and positively associated with ESG disclosure. The findings confirm the substantial role of non-Saudi board members and busy directors in enhancing ESG performance. Additionally, the significant and positive impact of corporate governance reforms in promoting the influence of non-Saudi members and busy directors on ESG disclosure is confirmed, underscoring the importance of regulatory frameworks in enhancing sustainable corporate practices.
The remainder of this paper is structured as follows. Section 2 discusses the factors contributing to board composition in Saudi Arabia’s context. Section 3 reviews relevant literature and develops the study hypotheses. Section 4 outlines the research methodology and data. Section 5 presents the analysis and results. Section 6 presents the discussion of this study. Finally, Section 7 concludes by summarizing the study, acknowledging limitations, and suggesting future research directions.
2. The Institutional Context of Saudi Arabia
The Saudi Arabian context presents distinct factors contributing to board busyness and the presence of foreign members on boards, driven by corporate governance reforms and the Vision 2030 initiative. Vision 2030, launched in 2016, sets forth ambitious goals to transform Saudi Arabia’s economy by enhancing the investment climate and increasing foreign direct investment (FDI) from 3.8% to 5.7% of GDP. A crucial strategy to achieve this involves attracting foreign professionals and leveraging their expertise within Saudi companies, particularly through board appointments [17]. The presence of foreign directors on the boards of Saudi firms aligns directly with Vision 2030’s objectives by bringing invaluable international experience, market knowledge, and global networks to the table.
Foreign directors can significantly enhance a company’s ability to navigate and penetrate global markets, forge international partnerships, and access new business opportunities. Their diverse perspectives and familiarity with international best practices in governance and sustainability can drive strategic improvements and innovation within Saudi firms [18]. This global insight is particularly crucial as Saudi companies strive to meet the elevated standards expected by international investors, thereby making the Saudi market more attractive and competitive on a global scale [13].
Moreover, the inclusion of foreign directors can boost the credibility and reputation of Saudi firms among foreign investors. This is because foreign directors often serve as a signal of a company’s commitment to high standards of governance and transparency. Such appointments can reassure international stakeholders of the firm’s alignment with global corporate governance practices, thereby facilitating greater foreign investment [19]. This alignment not only fulfills the Vision 2030 mandate of increasing FDI but also fosters a more inclusive and diversified corporate governance landscape in Saudi Arabia.
Additionally, foreign directors can help bridge cultural and regulatory gaps between Saudi firms and their international counterparts, enhancing mutual understanding and cooperation. This capability is vital for Saudi firms looking to expand their international footprint and collaborate on cross-border projects [20]. As such, the strategic inclusion of foreign directors on boards is not merely a step towards achieving Vision 2030’s investment targets but also a fundamental component of creating a robust, globally integrated economy.
Overall, empowering Saudi women and promoting gender diversity in the board of directors are mutually reinforcing efforts that can drive positive change within organizations and contribute to the overall advancement of Saudi society and economy.
Major reforms, such as the New Company Regulations (NCRs) implemented in 2017, have strengthened corporate governance by mandating board independence, establishing mandatory board committees, and prohibiting the chairperson from holding any other executive position, thereby eliminating CEO duality (Art. 83.1 of the NCR). However, the NCRs do not restrict multiple directorships, and combined with limited shareholder activism, this has enabled Saudi directors to accumulate excessive board appointments.
The issue of board busyness is exacerbated by a limited pool of qualified director candidates. Stringent NCR requirements for expertise in areas like accounting and finance have created high demand for skilled directors [18], yet the supply remains inadequate [13]. This shortfall leads to an over-reliance on the same seasoned professionals for multiple boards [19]. Additionally, prevalent family ownership structures contribute to busyness, as controlling family members often hold several related board seats [20]. Family firms in Saudi Arabia significantly contribute to the economy, with over 538,000 listed and unlisted firms contributing more than USD 216 billion to the GDP. By the end of 2017, 83% of the 43 listed family firms had the chairman from the same family, and 32% of their total board members were family members [21].
Moreover, the expanding capital markets in Saudi Arabia have increased the number of listed firms, elevating the demand for competent directors [18]. The appointment of prominent directors to multiple boards is also driven by status-seeking motives, given the cultural emphasis on prestige [13]. Additionally, directors often serve long tenures and hold multiple appointments, further contributing to busyness [22].
3. Literature Review and Hypothesis Development
3.1. The Relationship Between the Presence of Foreign Directors and ESG
The relationship between the presence of foreign directors and ESG performance has garnered significant attention in recent research. Foreign directors often bring diverse perspectives and global best practices to the board, which can positively influence a firm’s ESG performance. This enhancement is attributed to the diverse perspectives they bring, which foster innovative solutions and strategic improvements [23]. Foreign directors often introduce global best practices in ESG, aligning companies with international standards and expectations [24]. This alignment not only improves a company’s reputation but also attracts socially responsible investors [25].
According to resource dependence theory, diverse boards provide firms with essential resources such as varied perspectives, skills, and networks, which are vital for CSR decisions [26]. Foreign directors are likely to influence environmental and social performance by sharing knowledge about improving products safety [27]. Board nationality diversity also introduces diverse cultural values, leading to a better understanding of stakeholder needs and greater involvement in social activities [28,29].
Additionally, incorporating directors from diverse nationalities enhances board decisions, as these directors bring a broader set of experiences, insights, and viewpoints, leading to more comprehensive evaluations and discussions [30,31]. This diversity ultimately results in more informed and well-rounded decisions by the board. According to [32], directors with foreign experience, particularly from developed countries, tend to enhance corporate ESG strategies by introducing advanced sustainability practices. This aligns with resource dependence theory, suggesting that foreign directors can leverage their international networks and cross-cultural competencies to access essential resources for sustainable development [33].
Other studies indicate that foreign directors enhance transparency and governance within firms [34], reduce earnings management [35], and increase transparency and CSR disclosure due to their ties with international stakeholders [36]. The authors of ref. [37] argue that local stakeholders may view foreign directors as less trustworthy, prompting them to focus more on ethical issues like CSR to build legitimacy and trust. They found that firms with foreign CEOs are more committed to CSR than those with local CEOs.
Empirical evidence shows that nationality diversity significantly affects social and environmental performance [38], and foreign directors enhance accountability by improving CSR performance [39]. However, the authors of [27] found a negative relationship between foreign directors and CSR in Malaysia, while those of [40,41] found no link between nationality diversity and CSR performance.
Other studies also support the positive influence of foreign directors on ESG outcomes. For instance, a study [42] found that firms with a higher proportion of foreign directors on their boards exhibit significantly better environmental and social performance. This improvement is attributed to the foreign directors’ ability to integrate international ESG trends and practices into the company’s strategic planning.
Additionally, foreign directors can enhance a firm’s credibility and reputation in global markets. Having directors with international backgrounds signals a commitment to high standards of governance and sustainability, which can attract socially responsible investors and improve the firm’s standing among global stakeholders [25]. This increased credibility can lead to better financial performance and access to capital as investors are increasingly factoring ESG criteria into their investment decisions [43].
According to the above discussion, we argue that foreign directors tend to act ethically in local firms to boost reputation, reduce risk, and gain trust from local stakeholders. They are likely to use their diverse backgrounds and connections to address ESG issues in board dynamics. Thus, we propose the following hypothesis:
H1.  The presence of foreign board members is positively and significantly associated with the ESG disclosure scores of Saudi-listed companies.
3.2. The Relationship Between Board Busyness and ESG
Board busyness is defined as the number of board positions held by directors, often defined as holding three or more directorships [44,45,46]. This condition can potentially impact a director’s ability to effectively fulfill their responsibilities on each board. Professional associations and regulators generally view board busyness as undesirable and take measures to limit the number of directorships an individual can hold [46,47].
The academic literature presents a nuanced debate on the disadvantages and advantages of board busyness [45,46]. On the one hand, directors serving on multiple boards may offer valuable knowledge, experience, and extensive networks, potentially benefiting the company through enhanced advisory roles. However, the constraint of time significantly affects their ability to effectively balance advising and monitoring duties. Ref. [48] suggest that busy boards can enhance shareholder value in certain contexts, such as newly public or younger firms, which may benefit from the expertise and networks of busy directors due to their lower agency costs and monitoring burdens. Conversely, other studies argue for a positive relationship between busy boards and company performance. For instance, research [49,50] indicates that companies with busy boards may perform better, highlighting the potential benefits of directors’ broader experience and connections. Despite the ongoing debate, the impact of board busyness remains a critical consideration in corporate governance, balancing the trade-offs between valuable external insights and the practical limitations of time and attention.
Few studies have highlighted the significant impact of board busyness on a company’s ESG performance. The relationship between board busyness and ESG practices is complex, with evidence suggesting that overly busy boards may detract from effective ESG oversight and implementation.
Firstly, board busyness can negatively affect the time and attention directors devote to ESG issues. Directors who serve on multiple boards may face significant time constraints, limiting their capacity to engage deeply with the company’s sustainability strategies and initiatives [51]. According to [52], busy directors are less likely to attend board meetings regularly, reducing their effectiveness in overseeing critical ESG tasks. This lack of engagement can result in superficial ESG efforts and inadequate responses to sustainability challenges.
Secondly, empirical studies indicate that busy boards are associated with weaker ESG performance. A study by [53] found that firms with busy directors are less likely to engage in proactive environmental practices and tend to have poorer environmental performance. This finding suggests that busy directors may prioritize immediate financial and operational concerns over long-term sustainability goals, leading to suboptimal ESG outcomes.
Moreover, board busyness can exacerbate information asymmetry and reduce the quality of decision-making. Directors with multiple commitments may not have the bandwidth to thoroughly review and analyze ESG reports and data, leading to less informed decisions [54]. This inadequacy in monitoring and evaluation can hinder the company’s ability to implement effective ESG strategies and achieve desired sustainability targets.
Additionally, busy boards may struggle with accountability and transparency, which are crucial for robust ESG governance. Directors who are stretched thin across several boards may find it challenging to ensure comprehensive disclosure and reporting of ESG activities. This can undermine stakeholder trust and damage the company’s reputation [55]. Effective ESG governance requires diligent oversight and active involvement, which can be compromised by the directors’ divided attention.
However, it is important to note that not all studies uniformly support the negative impact of board busyness on ESG performance. Some researchers argue that experienced directors, despite their multiple commitments, can leverage their extensive networks and knowledge to enhance the company’s ESG initiatives [56] Nonetheless, the prevailing evidence suggests that the detrimental effects of board busyness often outweigh these potential benefits, especially in the context of intensive and evolving ESG demands.
H2.  The presence of busy board members is positively and significantly associated with the ESG disclosure scores of Saudi-listed companies.> study #3 The Role of Environmental, Social, and Governance Performance on Attracting Foreign Ownership: Evidence from Saudi Arabia by  Hend Alregab  Sustainability 2022, 14(23), 15626; https://doi.org/10.3390/su142315626 Abstract
This research aims to examine whether corporate social responsibility (CSR) and corporate governance (CG) attract foreign investors as key indicators of a firm’s sustainability. By adopting both stakeholder theory and legitimacy theory, it is assumed that a firm could build trustworthiness and legitimacy with its stakeholders by enhancing its environmental, social, and governance (ESG) performance. Using a sample of 110 firms from the Saudi stock market from different industries, this study employs both OLS and System-GMM estimation to test the effect of both ESG performance and CG on foreign investment in Saudi Arabia. The findings indicate that ESG performance positively affects foreign investment. Additionally, it is found that the corporate governance score has a greater effect than social and environmental scores. These empirical findings suggest that companies in Saudi Arabia should adopt global schemes to improve ESG performance to maximize the share of foreign investment, thus boosting the country’s economy and increasing the level of competitive advantages and sustainability.
Keywords: corporate social responsibility; foreign investment; ESG performance; corporate governance; stakeholder theory; legitimacy theory
1. Introduction
It is widely known that corporate social responsibility (CSR) plays a vital role in enhancing corporate sustainability and improving reputation [1]. More recently, huge amounts of attention have been paid, especially in emerging markets, to how a firm discloses CSR practices in its financial reports in a way that impresses the firm’s stakeholders [2]. More importantly, it is a major interest of any firm to attract foreign investment, as this is a key indicator of enhanced competitive advantages amongst peer firms. Good CSR disclosure can also reflect good corporate governance practices, which may distinguish a firm from others. The fundamental concept of CSR is to enhance a firm’s concern of environmental, social, and even governance aspects, and these efforts are considered by top management departing from well-known financial actions motivated solely by achieving firm profitability [3]. In Saudi Arabia, a key developing economy in a region that has improved rapidly in the last five years, most large firms reference CSR in their annual reports. This is not only to adhere to corporate governance policies but also to satisfy the various needs of stakeholders including shareholders, investors, employees, and the wider community.
The rising interest in CSR in Saudi firms follows the introduction of the Saudi Vision 2030 in 2016, which pays significant attention to social responsibility and its practices in the local community. Additionally, the improvement in corporate governance in the same vision plays a role in motivating Saudi firms to start publishing their CSR and other initiatives that help different parties in the Saudi community. The CSR strategy was launched in 2020 and aimed at promoting corporate social responsibility, which is a part of the national transformation program in the Ministry of Human Resources and Social Development. The strategy includes analyzing the reality of corporate social responsibility in the Kingdom and conducting a standard comparison of the international best practices in the field. Its vision was to establish a culture of social responsibility in all developing sectors to enhance corporate contributions to social responsibility programs, which have a vital impact on the development of the local society, environment, and whole economy. This strategy also aims to establish a social responsibility infrastructure by activating social responsibility capabilities represented by six pillars: partnerships and governance, laws and regulations, national planning, motivation and encouragement, awareness and capacity development, and monitoring and measurement.
The concentration on CSR in Saudi Arabia comes from its vision and reforms applied to various aspects of the economy to open it to the global economy and host foreign investment, which is believed to boost the local economy and sustainability [4]. Even though the institutionalization of CSR in Saudi firms is still growing, most firms have followed these orientations since 2016 and confirm that they are willing to enhance CSR practices and show them in their annual reports. However, it is difficult to predict the determinants of CSR disclosure in Saudi firms. Additionally, foreign investment rules are also being modified to allow more foreign equity to enter the Saudi stock market, either in the form of individual investors or via direct investment by large foreign corporations. Hence, the rise of foreign investment witnessed recently could be explained by the disclosure of CSR by Saudi firms, which researchers have not yet examined in this field.
However, prior research discusses the difficulties for foreign investors when deciding to invest in a host country [1,5]. This is mainly due to uncertainty and information asymmetry that could be increased in the case of foreign investment. Hence, corporations that put more emphasis on enhancing ESG performance could reduce the level of uncertainty and improve trustworthiness [6]. Accordingly, and based on the Stakeholder theory, a firm should facilitate all its stakeholders’ needs [7]. This can be achieved by improving the level of disclosure and increasing its accountability towards those stakeholders. As a result, these actions will also build a solid and trustworthy relationship between the host firm and foreign investors [8]. Legitimacy theory also provides a theoretical framework that could explain this relationship. That is, firms that improve their ESG performance in various ways following global CSR standards may seem more legitimate and trustworthy to foreign investors [9]. Improving corporate governance is another benchmark for foreign investors who wish to see that their host firm is adopting good corporate governance schemes that alleviate its legitimacy and trustworthiness.
This research aims to examine whether ESG performance and CG can attract foreign investment as key indicators of good performance and sustainability. This research contributes to the existing literature on CSR. Although the empirical literature on CSR is rapidly growing, it still provides inconsistent findings when explaining the rationale of the relationship between CSR and foreign investment. This may be justified by the presence of too many proxies that could affect these types of relationships. This research adopts two critical theories that may clarify the association between improving ESG performance as a tool of CSR and the magnitude of foreign investment. Furthermore, most prior literature is limited to foreign direct investment (FDI) and its impact on CSR [10,11,12,13,14]. However, regardless of the economic importance of FDI for corporations and countries, the literature neglects the importance of attracting individual foreign investors who can improve the governance practices of the stock market and increase liquidity [15]. This research aims to provide empirical findings that justify why ESG performance is important for foreign investors.
Given the nature of Saudi Arabia and the recent global focus on the significant reform of its economy, which is one of the fastest-growing economies in the region, this research was conducted on Saudi firms for two reasons. First, the notable reforms in CSR that have been witnessed amongst Saudi firms in the last five years could be crucial and informative if they are investigated alongside the growth in foreign investment. Second, the parallel improvement in corporate governance in Saudi Arabia can be linked to the increase in foreign investment percentage, which jumped by 150% in 2021 compared to 2018. Taken together, theoretically and empirically, this research is expected to fill the gap in the literature on CSR, CG, and foreign investment, especially in emerging markets.
The rest of the study is organized as follows. The next section illustrates the theoretical and empirical literature on the relationship between CSR, CG, corporate performance, and foreign investment. This also includes a discussion of hypotheses development. Section 3 presents the sample and methodology, followed by regression results and a discussion in Section 4. The final section summarizes the research conclusions, implications, and limitations.
2. Literature Review and Hypotheses Development
2.1. Theoretical Background of CSR
The argument of corporate social responsibility for businesses by the well-known author Milton Friedman was originally conceived in 1970. It is argued that the only social responsibility for a firm is to maximize its profit, and that other objectives are incompatible with this objective [16]. Most neoclassic theorists support this thought by Friedman and his belief that this is what shareholders want from a business where they invest their money [17]. However, the modern economy has changed according to different business environments and various thoughts regarding the objective of CSR and what responsibilities organizations have in terms of their communities. Freeman [7] criticized Friedman’s belief by introducing the concept of stakeholder theory which advocated that there are other stakeholders, such as employees, suppliers, customers, government, and communities, who have different interests from those of shareholders; the theory emphasizes these stakeholders’ needs, which should receive more attention by firm decision makers. By the end of the twentieth century, the business environment had become more complex, and consumers were more demanding. Recourses also became more limited, creating more problems regarding the supply chain. Technological development created another dilemma in that a business’s stakeholders became aware of all the activities conducted by the business. All of these rapid changes drew attention to what Friedman advocated and what the business environment currently needs, in addition to what a business can do for society and the people living in it.
The limitation of the classical model and the development of business needs and environment in the 21st century encourage the debate of whether CSR is needed and, more importantly, what is demanded by stakeholders of corporations. This is associated with the concept of shared value creation introduced by Porter and Kramer [18], which is based on the idea of identifying and expanding the connections between societal and economic progress. They build on the theoretical background of CSR by addressing critical differences between corporate share value creation and CSR. While CSR is about performing good work, share value creation links societal and economic benefits to cost. Additionally, According to Porter and Kramer [18], the connection between corporations and society should be in the context of share value creation. The share value strategies concentrate on shifting from capitalism into a more sustainable social, environmental, and economic paradigm. Corporate philanthropy should be embedded in the strategic giving that helps society and simultaneously evolves corporate competitive advantage [19]. However, seeing CSR always as only the performance of good work is questioned by Morsing and Vallentin [20] and Falck and Heblich [21], who argued that there is a possibility that companies that are performing good work in the context of CSR are corrupt in their underlying structure, thus hiding weak performance.
CSR was defined originally by Bowen [22] as “the social obligation”. García-de-Madariaga and Rodríguez-de-Rivera-Cremades [17] defined CSR as “the set of obligations and lawful and ethical commitments with stakeholders, stemming from impacts of activities and operations of firms cause on social, labour, environmental and human rights fields”. The concept of CSR has evolved over time; Chandler [23] added to the theoretical concept of CSR by building on Porter and Kramer [18]’s perspective of value creation as one of the strategic CSRs. He states that “the firm creates the most value when it focuses on what it does best, which is defined by its core operations”. Chandler [23] defined the strategic CRS as “the incorporation of a holistic CSR perspective within a firm’s strategic planning and core operations so that the firm is managed in the interests of a broad set of stakeholders to optimize value over the medium to long term” [23].
Furthermore, based on legitimacy theory, it can be said that corporations are required to pay attention to the internal and external expectations of stakeholders, which may not necessarily be profit-maximizing, but rather involve increasing self-regulation and legitimacy [9,24,25]. By doing this, corporations can maximize their profit and, more importantly, their value in the community by applying good CSR schemes and disclosing them in their annual reports. However, it is not easy to say that CSR will improve performance; this is because of the numerous intersectional relationships and indicators that can predict firm performance (e.g., corporate governance, market share, reputation, geographical indicators, and other indicators); thus, the empirical literature should be reviewed to paint a full picture of CSR and its effect on firm performance and consequently attract foreign investment.
Based on the above review of the key theoretical concepts that could provide a relative explanation of the relationship between CSR, CG, and foreign investment, it could be said that stakeholder theory provides a framework for how a corporation should satisfy the various needs of a group of stakeholders, including foreign investors [26]. This can be accomplished by improving corporate policies and disclosure criteria that reduce risk-taking, uncertainty, and information asymmetry. The theory highlights that corporations need to focus on targets other than profit-maximizing and engage in more social and environmental actions that improve the whole community. When doing so, foreign investors may trust and invest in these host firms. Legitimacy theory also explains this relationship from the other side. Foreign investors can build trustworthy relationships with corporations that engage in social actions within societal boundaries and norms [27].
2.2. Literature Review
Whether or not CSR positively affects firm value is examined in the literature. The stakeholder theory presented by Freeman [7] suggests that CSR can improve the well-being of all firm stakeholders and maximize the firm’s competitive advantages by building a trustworthy relationship with various stakeholders [28,29,30]. Several prior studies showed a positive impact of CSR on corporate financial performance (CFP) [8,31,32,33,34,35,36,37,38,39,40,41]. However, several studies found no evidence of a positive association between CSR and financial performance [42,43]. Additionally, some studies found a negative association in this relationship [44,45]. A few studies showed that the relationship between CSR and CFP is non-linear and may have a U-shaped relationship if the cost of CSR is considered and examined [46,47,48]. Similarly, Kabir and Thai (2021) found that foreign ownership, international orientation, gender diversity, and CEO education positively influence CSR.
The moderating role of corporate governance on CSR is also widely investigated in the literature [25,49,50,51,52,53,54,55,56,57,58,59]. Money and Schepers [50] showed evidence that UK companies shifted from the agency theory concept, which concentrates on shareholders’ expectations only, to the broader concept of stakeholders. They found an alignment between corporate governance and CSR programs. Similarly, Jamali et al. [60] provided evidence from qualitative approach outcomes that top management in Lebanon believes that corporate governance is a significant pillar of sustainable CSR. Huang [51] and Tibiletti et al. [59] also found that the presence of independent outside directors positively affects CSR performance. Esa and Gazali [53] investigated whether corporate governance affects the level of CSR disclosure in Malaysian government-linked companies, and they concluded that the board size has a positive impact on CSR disclosure. On the contrary, Worokinasih and Zaini [25] and Kirana and Prasetyo [57] found that CSR disclosure is negatively affected by corporate governance indicators in Indonesian samples. Oh et al. [61] concluded that managerial ownership has a negative impact on CSR. Another stream of the literature found no significant relationship between corporate governance and CSR. Orbaningsih and Sawitri [56] found no influence of managerial ownership, foreign ownership, and company size on CSR disclosure, but they found a positive influence of institutional ownership on CSR disclosure, similar to what Harjoto and Jo [52] found. Yahaya and Apochi [58] concluded that board size and independence fail to show a significant impact on CSR in Nigerian companies.
Another aspect of the literature links the quality of CSR disclosure with foreign investment, either direct or indirect [62]. Most of these studies show that high-quality CSR disclosure is associated with firms that have a higher proportion of foreign ownership [41,56,63,64,65]. A few studies have shown that firms that are superior in their CSR performance are more likely to attract foreign investment [1,61,66]. Lee et al. [1] examined whether the CSR performance of the host firms can increase their foreign investments. By using a sample from the Korean stock market, they concluded that higher CSR performance is associated with higher foreign investment, meaning that improved CSR disclosure could attract foreign equity to the firm. In a similar vein, Chauhan and Kumar [66] examined the effect of disclosing non-financial data to foreign investors using a large sample of Indian firms. They concluded that foreign investors prefer to invest in firms that disclose CSR information.
2.3. Hypotheses Development
Based on the theoretical and empirical literature, socially responsible firms could be a target for foreign investors [61]. By adopting both stakeholder theory and legitimacy theory, it is assumed that a firm could build trustworthiness and legitimacy with its stakeholders by engaging in more environmental and social actions. Investors know what the host firm should do and, more importantly, what it should not do. Irresponsible actions that are taken by the host firm could negatively affect future decisions that are taken by investors. According to Panicker [67], foreign investors differ from domestic ones in three ways; first, foreign investors are likely to pay more attention to the sustainability and the survival of the host firm, especially if their investment is in the long-run time horizon. Firms participating in social actions and responding to their communities are believed to maintain sustainable development [65]. Second, foreign investors are more aware of environmental and social issues due to their experience in multiple foreign markets, which gives them a higher level of responsibility toward the social community [63]. Third, the problem of information asymmetry is rising more in the case of foreign investors since the separation of shareholders and management is active as one of the corporate governance concepts [65,68].
Based on the previous discussion, it is assumed that foreign investors demand more social and environmental engagement from their host firms to reduce the level of risk and uncertainty [1]. This engagement should also be declared clearly in the company’s reports. This is mainly to provide a transparent vision and positive impression for potential investors [69,70]. Furthermore, top management may be aware that foreign investors seek low-risk businesses and low information asymmetry when they decide to invest in a foreign country. Hence, top management may take more decisions with the aim of increasing ESG performance to influence investors and attract them to their companies. Taken together, it is assumed that improving ESG performance could positively affect the magnitude of foreign ownership over time. Accordingly, the main research hypothesis can be set as follows:
Hypothesis 1: ESG performance has a positive impact on foreign ownership.
CSR in Saudi firms is usually classified into three major categories: (I) social, (II) environmental, and (III) governance. The social scheme mainly includes donations, health and safety, human rights, employees, and community welfare. The environmental scheme includes emission reduction, product innovation, source consumption, recycling, and afforestation. The governance scheme includes governance applications that raise the sense of responsibility, accountability, fairness, and transparency [71]. These include governance indicators such as ownership structure, board composition, executive compensation, and level of disclosure in annual reports. It is assumed that a rational foreign investor may follow one of the three main indicators of ESG. Those investors may be more attracted to social actions that are taken by the host firm. Similarly, it could be said that foreign investors are willing to see more environmental protection schemes from their host firm. Also, the importance of corporate governance is not less than the other two previous indicators. Hence, breaking the main hypothesis further into three sup-hypotheses may provide additional explanation of the relationship between foreign ownership and ESG performance. This study follows Ortas [72] in breaking down the ESG performance of these three groups. This is expected to provide precise results related to each proxy. It also tests which of the three groups has the highest effect on foreign ownership. This study breaks Hypothesis 1 further down into three sup-hypotheses:
Hypothesis 1a: The social score has a positive impact on foreign ownership.
Hypothesis 1b: The environmental score has a positive impact on foreign ownership.
Hypothesis 1c: The governance score has a positive impact on foreign ownership.> study #4 <BOARD DIVERSITY IMPACT ON CORPORATE PROFITABILITY AND ENVIRONMENTAL, SOCIAL, AND GOVERNANCE PERFORMANCE: A STUDY OF CORPORATE GOVERNANCE Khaleed Omair Alotaibi *,  Shehabaddin Abdullah Abdulwadod Al-Dubai ** * Imam Mohammad Ibn Saud Islamic University, Applied College, Riyadh, Saudi Arabia ** Corresponding author, Department of Accounting, School of Business, King Faisal University, Al-Ahsa, Saudi Arabia Contact details: Department of Accounting, School of Business, King Faisal University, P. O. Box 400, 31982 Al-Ahsa, Saudi Arabia How to cite this paper: Alotaibi, K. O., &  Al-Dubai, S. A. A. (2024). Board diversity impact on corporate profitability and environmental, social, and governance performance: A study of corporate governance. Corporate Law & Governance Review, 6(2), 93–106. https://doi.org/10.22495/clgrv6i2p9 Copyright © 2024 The Authors This work is licensed under a Creative Commons Attribution 4.0 International License (CC BY 4.0). https://creativecommons.org/licenses/by/ 4.0/ ISSN Online: 2664-1542 ISSN Print: 2707-1111 Received: 03.02.2024 Accepted: 19.07.2024 JEL Classification: G10, G28, G34, M14 DOI: 10.22495/clgrv6i2p9 Abstract With the growing interest in understanding how environmental, social, and governance (ESG) factors interact and influence one another, as evidenced by increased attention from decision-makers, policymakers, stakeholders, investors, and corporate managers, this research aims to advance the existing literature on the subject (Ahmad et al., 2021; Al-Jaifi et al., 2023). This research aims to address a gap in the literature by examining the influence of board diversity (BD) in terms of board independence (BI) and gender diversity (GD) (i.e., female directors) on corporate ESG performance (ESGP), specifically considering the moderating effect of these two variables on the relationship between corporate profitability (CP) and ESGP. The analysis is based on a dataset encompassing 126 firm-year observations from 30 Saudi non-financial public listed companies spanning the period from 2013 to 2022. The results of the direct models show that CP has an insignificant negative impact, while BD, particularly in terms of independent directors and female directors, enhances ESGP. Moreover, the results from the moderation models indicate that while BI does not show a statistically significant positive impact on the relationship, GD demonstrates an insignificant negative effect on ESGP. Keywords: ESG Performance, Corporate Profitability, Board Diversity, Board Independence, Board Gender Diversity, Female Directors, Saudi Arabia Authors’ individual contribution: Conceptualization — K.O.A. and S.A.A.A.-D.; Methodology — K.O.A. and S.A.A.A.-D.; Investigation — S.A.A.A.-D.; Resources — K.O.A. and S.A.A.A.-D.; Writing — Original Draft — S.A.A.A.-D.; Writing — Review & Editing — K.O.A. and S.A.A.A.-D.; Project Administration — K.O.A.; Funding Acquisition — K.O.A. Declaration of conflicting interests: The Author declares that there is no conflict of interest. Acknowledgements: This work was supported and funded by the Deanship of Scientific Research at Imam Mohammad Ibn Saud Islamic University (IMSIU, RG23035). 93 Corporate Law & Governance Review / Volume 6, Issue 2, 2024 1. INTRODUCTION The emerging challenge of climate change is a global phenomenon of immense magnitude that demands the attention of the international community (Alsagr & Van Hemmen, 2021; Daugaard & Ding, 2022). In light of escalating concerns regarding climate change, environmental degradation, and corporate misconduct, businesses have come under intense scrutiny as significant contributors to social, environmental, and economic problems (Aydoğmuş et al., 2022; Bamahros et al., 2022; Porter & Kramer, 2011; Weston & Nnadi, 2021). Recognizing the urgent need for environmental preservation, countries worldwide have taken steps to reduce pollution and encourage environmentally responsible behavior through initiatives such as carbon taxes and emissions trading schemes (Cheng et al., 2023; Ortiz-de-Mandojana et al., 2016). Consequently, governments have enacted updated legislation designed to safeguard the interests of consumers, investors, and other stakeholders (Cheng et al., 2023; Minutolo et al., 2019) and increasingly focused on implementing measures to address these issues in recent years. Consequently, the research focus has shifted towards investigating corporate environmental, social, and governance (ESG) factors, with particular emphasis on the association between ESG performance (ESGP) and corporate evaluation (Zhou et al., 2022). Strategic decision-makers must address sustainability as a critical management paradigm to achieve competitive success in today’s business landscape. Failure to do so may lead to the inevitable extinction of firms, according to experts. Furthermore, the integration of sustainability into a corporation’s mission and stakeholder relationships is believed to be the defining factor for success or failure in the twenty-first century (Galbreath, 2011). In order to achieve their social and environmental objectives, companies may finance their initiatives through their own resources, which may subsequently impact their financial performance (FP). On the other hand, in the absence of such resources, these companies may seek debt financing and bear the financial burdens of interest in order to present themselves to society in a more ethical manner that is responsive to environmental and social developments. The influence of corporate profitability (CP) and resources on ESG can be substantial, as demonstrated by a study conducted by Burkhardt et al. (2020). Their results highlight the importance of considering firm performance and resources when analyzing the ESG. Companies must balance their growth objectives with the prioritization of environmental concerns to ensure effective ESG practices. By doing so, firms can navigate resource constraints, maintain sustainable initiatives, and achieve positive environmental performance. The demand for ESG data in the market is increasing, as ESG considerations serve as the foundation for sustainable investment (Ahmad et al., 2021; Ammer et al., 2020; Bamahros et al., 2022). Major rating agencies are increasingly focusing on analyzing ESG information and transforming it into quantitative data. Enhancing corporate ESG disclosure management, enhancing ESG ratings, and further improving ESGP will be key elements of the strategy and policy for any listed company (Chen, 2023). This regulatory landscape has left companies susceptible to mounting pressure from both regulators and society at large, demanding greater accountability regarding environmental matters and climate change (Al-Jaifi et al., 2023). Consequently, businesses find themselves increasingly held responsible for their actions (Aydoğmuş et al., 2022; Weston & Nnadi, 2021; Yu et al., 2018). These institutional changes have not only redefined the competitive landscape but have also positioned environmental issues as a central focus within the realm of corporate governance discussion (Ortiz-de-Mandojana et al., 2016). The sustainability of a company is closely intertwined with the extent to which it acknowledges and addresses the concerns of its various stakeholders, as per stakeholder theory. This theory emphasizes the importance of corporate boards adopting a stakeholder management approach that aims to optimize outcomes for all stakeholder groups rather than favoring a particular one, such as shareholders. Nevertheless, comprehending and satisfying the needs and anticipations of various stakeholders demands a relational standpoint and the proficiency to foster advantageous associations with every one of them (Galbreath, 2011). The relationship between board characteristics and ESGP has garnered significant attention from decision-makers, policymakers, stakeholders, investors, and corporate managers (Ahmad et al., 2021; Minutolo et al., 2019). This growing interest stems from the need for a comprehensive understanding of how ESGP and various factors interact and influence each other (Ahmad et al., 2021; Al-Jaifi et al., 2023; Bilyay-Erdogan, 2022; Hamdi et al., 2022). Previous research has primarily focused on examining the direct impact of ESG on CP and performance (Hamdi et al., 2022) and has overlooked the impact of CP on ESGP taking into consideration the moderating effect of board attributes. Corporate governance plays a crucial role in enhancing company performance, with a focus on implementing structures and mechanisms for effective corporate management. Key elements of corporate governance, such as board attributes including board independence (BI) and gender diversity (GD), have garnered limited attention in existing literature (Al-Jaifi et al., 2023; Rahmadani et al., 2023). Particularly within Gulf Cooperation Council (GCC) nations like Saudi Arabia, there is a lack of research exploring the influence of board attributes on ESGP despite growing recognition of environmental concerns (Arayssi et al., 2020). Therefore, a comprehensive investigation into the impact of CP on ESGP, while considering the moderating role of board attributes, is essential. Building upon previous literature, this study aims to address this research gap by examining how BI and GD, as pillars of corporate governance, influence the relationship between CP and ESGP. These board attributes are highlighted as critical moderating variables in the context of corporate performance and corporate social responsibility (CSR) (Pekovic & Vogt, 2021). Furthermore, this research study adds valuable insights to the prevailing body of ESG literature by offering fresh empirical evidence derived from 94 Corporate Law & Governance Review / Volume 6, Issue 2, 2024 a comprehensive investigation conducted in Saudi Arabia. This particular country, being an emerging market and a member of the GCC, does not enforce obligatory ESG disclosure by businesses, making the findings even more significant. The limited literature on environmental sustainability in developing markets makes the Saudi Arabian financial market an analytically interesting subject. Hence, there is still an emerging field for studying this issue in the country (Ammer et al., 2020).  This study employed unbalanced panel data comprising 126 firm-year observations from 30 nonfinancial public listed companies in Saudi Arabia over the period spanning from 2013 to 2022. The outcomes of this study emphasize the significant direct influence of board diversity (BD), specifically in terms of BI and GD, in enhancing ESGP. On the other hand, the impact of CP was found to be insignificant and negative. However, when considering BI and GD as moderators of the relationship between CP and ESGP, a nuanced picture emerged. Notably, the influence of BI exhibits a statistically insignificant positive effect on the relationship, in contrast to the insignificant negative effect demonstrated by GD. The remainder of the paper is structured as follows. Section 2 offers a concise review of the literature on the connection between CP, BI, GD, and ESGP, and formulates the hypotheses. Section 3 outlines the methodology of the study. Section 4 presents the obtained results and Section 5 discusses them. Section 6 concludes the paper with an analysis of the study’s limitations and suggestions for future research. 2. LITERATURE REVIEW AND HYPOTHESES DEVELOPMENT 2.1. ESG in Saudi Arabia The incorporation of sustainability principles into the ESG investment strategy of the Public Investment Fund (PIF) of Saudi Arabia is advancing significantly. The country is taking steps to reduce its carbon footprint, promote sustainability, and ensure that its citizens have access to quality education and healthcare. Mohammed Al-Rumaih — chief executive officer (CEO) of the Saudi Stock Exchange (Tadawul) said: “As part of Vision 2030, … our commitment to ESG is vital to achieving these goals. The Saudi Exchange has a central role to play in encouraging sustainable financial growth” (Institutional Investor, 2022, para. 10). The Saudi government has set ambitious goals to reduce its greenhouse gas emissions by 30% by 2030 (Krimly, 2021). Saudi Arabia’s PIF is making strides in integrating sustainability principles into its ESG investment strategy, expanding its assets under management portfolio of $450 billion and demonstrating a commitment to responsible investing. This is part of the government’s broader objective to enhance the Kingdom’s non-oil gross domestic product (GDP) by $300 billion by 2025, with a focus on investing in listed companies engaged in renewable energy, water, electricity, and carbon management projects (Arab News, 2022). Moreover, the Saudi government is actively working towards enhancing social conditions by implementing programs that promote equal access to education and healthcare for all citizens, irrespective of their socio-economic status. Unlike many developed countries, Saudi Arabia allows companies to choose whether or not to disclose their ESG practices, making it an intriguing context for analysis (Harjoto & Wang, 2020). According to Ammer et al. (2020), the Tadawul’s participation in the United Nations’s Sustainable Stock Exchanges (UN SSE) Initiative in 2018 marked a significant step towards integrating sustainability into the Saudi capital market. Through this partnership, corporations are motivated to improve their commitment to sustainable practices, with a particular focus on social and environmental goals such as responsible production, consumption, and addressing climate-related challenges. This development highlights the increasing importance of incorporating ESG considerations into the operations and decision-making processes of firms operating in the Saudi market. 2.2. Theoretical framework Prior empirical studies have extensively utilized three main theoretical perspectives, namely legitimacy theory, agency theory, and stakeholder theory, to establish a comprehensive understanding of the association between FP, governance mechanisms and ESGP (Bamahros et al., 2022; Bhatia & Makkar, 2019; Cheng et al., 2023; Naseem et al., 2017; Qureshi et al., 2020). By examining these theoretical perspectives, the link between board attributes and ESGP can be explored in a more scientific and professional manner. The relationship between governance mechanisms, corporate ESG/CSR, and CP is often examined through the perspective of legitimacy theory, which suggests a social contract exists between a company and society wherein stakeholders bestow upon the company the right to operate (Bamahros et al., 2022). This social contract necessitates continuous reaffirmation and adherence to societal expectations, leading companies to emphasize CSR as a means to secure societal approval and legitimacy (Bhatia & Makkar, 2019). Companies with poor environmental and social performance may face risks to their social legitimacy and image, prompting them to disclose discretionary CSR performance statements to enhance stakeholder perceptions and uphold their moral claim to the social contract (Bilyay-Erdogan, 2022; Qureshi et al., 2020). The importance of agency theory has been emphasized by a study conducted by Bhatia and Makkar (2019), highlighting the role of board members in ensuring stakeholder interests are prioritized through vigilant oversight of managerial decisions to prevent conflicts and opportunistic behavior. This approach, as indicated by García Martín and Herrero (2018), can help mitigate agency problems and associated costs, ultimately strengthening the internal control system. Consequently, the implementation of an enhanced governance structure not only boosts managers’ performance but also elevates the effectiveness of ESG initiatives (Naseem et al., 2017). The importance of stakeholder theory lies in advocating for firms to prioritize the interests of all 95 Corporate Law & Governance Review / Volume 6, Issue 2, 2024 stakeholders, showcasing the value of a diverse board in representing various shareholder viewpoints, especially those concerning environmental matters (Al-Jaifi et al., 2023). According to stakeholder theory, the success of a company hinges on not just shareholder concerns, but also those of employees, clients, the environment, local communities, and others, driven by legal, economic, and ethical considerations (Cheng et al., 2023). Consequently, enhancing corporate governance practices plays a crucial role in elevating levels of corporate social performance (DasGupta & Pathak, 2023). Fostering enduring relationships with stakeholders requires firms to address the expectations and concerns of key stakeholders through transparent reporting of sustainability efforts in the realm of ESG initiatives (Bamahros et al., 2022). 2.3. Corporate profitability and ESG performance The concept of ESG has become increasingly important in the corporate world in recent times (Ahmad et al., 2021; Ballestero et al., 2012;  Galletta et al., 2022; Harjoto & Wang, 2020; Nollet  et al., 2016; Usman & Amran, 2015; Zhou  et al., 2022) and received a growing interest among both business professionals and academics  (Ahmad et al., 2021; Bilyay-Erdogan, 2022; Cheng  et al., 2023). According to Cheng et al. (2023), corporate ESG is of increasing importance due to the rise in demand for ESG data in sustainable investment. Rating agencies and market participants now place greater emphasis on analyzing ESG information and transforming it into quantitative data. As a result, listed companies are heavily focusing on enhancing their ESG disclosure management, improving ESG ratings, and ultimately enhancing their overall ESGP. The concept of ESG encompasses environment, social responsibility, and governance, with a primary emphasis on evaluating the performance of an enterprise or company’s investment strategy through the lens of sustainability and ethical impact (Ahmad et al., 2021; Cheng et al., 2023). ESG serves as a means of measuring the extent of a company’s involvement in CSR, representing the “sustainable efficiency of a firm” (Baran et al., 2022). Integrating ESGP indicators is widely considered the most effective approach to evaluating a company’s sustainable performance, aligning with the concept of sustainable financial value which encompasses the integration of ESG considerations within the standard financial framework (Hřebíček et al., 2014). According to stakeholder theory, multiple studies have consistently indicated that companies achieving excellence in ESGP experience superior FP and enjoy higher market valuation compared to their industry counterparts (Chouaibi et al., 2021; Hamdi et al., 2022). The association between specific components of ESG and FP may differ across different market contexts (Hamdi et al., 2022). As businesses increasingly recognize the importance of ESG considerations in their operations, they are faced with the challenge of translating these ethical principles into the best business results (Syed, 2017). One challenge associated with the implementation of ESG into business is understanding the potential benefits that can be gained from implementing such initiatives. Extensive research has been conducted to understand the benefits of ESGP, and the evidence suggests that it holds significant value for corporations (Aydoğmuş et al., 2022; Bilyay-Erdogan, 2022; Burkhardt et al., 2020; Cheng et al., 2023). Companies that demonstrate stronger ESGP are often valued more highly in the market (Ahmad et al., 2021; Jo & Harjoto, 2011; Zhou et al., 2022) and may lead to higher financial return and higher certainty equivalent return (Ahmed et al., 2021).  In addition, companies with robust ESGP enjoy reduced costs of equity (Dhaliwal et al., 2010). This suggests that investors view these companies as less risky and are willing to accept lower returns in exchange for holding their shares. Furthermore, improved credit ratings have been associated with companies that prioritize ESGP (Attig et al., 2013). Lenders and credit agencies perceive these companies as more creditworthy, which can lead to lower borrowing costs and increased access to capital. Lastly, companies with strong ESGP exhibit higher analyst forecast accuracy (Dhaliwal et al., 2011). This suggests that their commitment to ESG practices provides analysts with valuable information and insights, enabling them to make more accurate predictions about future FP. In a recent investigation carried out by Burkhardt et al. (2020), the objective was to examine the potential impact of FP on the association between GD and environmental performance. It was found that firms facing resource constraints and driven by growth objectives may compromise their environmental initiatives and sustainability practices. This suggests that prioritizing environmental concerns and effectively addressing ESG factors can be challenging for such firms. Contrary to popular belief, certain perspectives argue that the incorporation of ESG considerations can have a detrimental impact on expected returns (Hong & Kacperczyk, 2009). However, Nollet  et al. (2016) contend that the connection between a company’s FP and its CSR remains tenuous. Though a positive correlation has been commonly observed, there have also been instances of negative outcomes (Mittal et al., 2008) and inconsistent findings (Schreck, 2011). In the Saudi context, a recent research study conducted over the decade from 2010 to 2019 has revealed findings that shed light on the relationship between CP and ESG disclosure among non-financial public listed companies. The study, carried out by Bamahros et al. (2022), found that the return on equity (ROE) as a measure of CP did not demonstrate a significant influence on the extent of ESG disclosures made by these companies. Thus, the first research hypotheses formulated is as follows: H1: Corporate profitability affects corporate ESG performance. 2.4. Board independence The effectiveness of corporate governance hinges significantly on the presence of independent directors within the board structure, acting as a crucial monitoring mechanism to safeguard shareholder interests while maintaining a delicate balance with management (Al-Jaifi et al., 2023). Furthermore, independent directors play a pivotal 96 Corporate Law & Governance Review / Volume 6, Issue 2, 2024 role in driving sustainable initiatives within organizations, emphasizing the critical need for a comprehensive examination of their impact on ESGP, particularly in emerging markets (Shakil  et al., 2021). Drawing from the agency theory, independent directors are endowed with greater oversight and control over managerial functions, ensuring a level of accountability that aligns with stakeholder expectations (Al-Jaifi et al., 2023). Their adherence to the tenets of the stakeholder theory further underscores their responsiveness to social demands, environmental concerns, and the imperative to integrate sustainable practices into corporate strategies (Cucari et al., 2018). As a consequence, firms with BI are more inclined to engage in environmental activities, disclose ESG-related information, and navigate the complex interplay between financial objectives and environmental stewardship (Akbas, 2016; Hamdi et al., 2022;  Khan et al., 2013; Liao et al., 2015). It is evident that independent directors wield a significant influence over ESGP, environmental endeavors, and the harmonization of divergent interests among managers, shareholders, and stakeholders (García Martín & Herrero, 2020; Kufo & Shtembari, 2023). By prioritizing board compositions dominated by independent outsiders, companies strive to bolster accountability and transparency within their governance frameworks, thus fostering an environment where decisions are made in the best interests of all stakeholders, including shareholders and society at large (Kufo &  Shtembari, 2023). The strong ethical compass exhibited by independent directors, driven by a keen awareness of their reputational risks and societal responsibilities, propels them to navigate corporate landscapes with prudence and deliberation (Khan  et al., 2013; Kufo & Shtembari, 2023). Contrary to prevailing assumptions, a study conducted by Bamahros et al. (2022) in the Saudi context explored the relationship between BI and the level of ESG disclosure in non-financial public listed companies. The findings of the research unveiled that there was no substantial evidence to support the idea that BI directly impacts the extent of ESG disclosures within these companies. Thus, the second and third research hypotheses formulated are as follows:  H2: Board independence affects corporate ESG performance. H3: Board independence moderates the relationship between corporate profitability and ESG performance. 2.5. Board gender diversity The literature on the environment and sustainability underscores the potential impact of having a diverse gender composition on the board of directors, in relation to both financial outcomes and the performance of companies in terms of ESG factors (Burkhardt et al., 2020). The significance of women in board positions has recently gained considerable attention, with several countries even implementing laws to ensure female representation on corporate boards. Despite these efforts, the existing research has failed to present compelling evidence regarding the impact of women on boards of directors. Therefore, further examinations are required to delve into the influence of women directors on both board decision-making and effectiveness (Nielsen & Huse, 2010). Increasing GD on boards has been shown to have implications for stakeholder relationships and corporate accountability, leading to improved ethical conduct and economic and social growth  (Galbreath, 2011). Several studies, such as the research conducted by Al-Jaifi et al. (2023) and García Martín and Herrero (2018), have put forth the notion that boards comprising a diverse range of genders possess a heightened awareness and understanding of social and environmental matters. According to Nielsen and Huse (2010), women have the ability to wield their influence when it comes to CSR and environmental initiatives. This heightened sensitivity towards such issues underscores the substantial influence that female directors can have in shaping organizational practices. This sensitivity can be attributed, in part, to women’s professional experience, as women have often worked in companies with a stronger social and environmental focus due to gender inequalities (García Martín & Herrero, 2020). Moreover, female directors have a greater likelihood of effectively engaging with various stakeholders and meeting their needs, showcasing social responsiveness (Galbreath, 2011). The operational control tasks of the board include the monitoring of budgetary and planning cycles. Strategic control, on the other hand, encompasses various activities such as engaging in long-term strategy discussions, conducting environmental monitoring, benchmarking performance, and utilizing quality indices. Additionally, it involves active engagement with stakeholders to ensure effective governance and decision-making (Nielsen & Huse, 2010). By fostering greater GD on corporate boards, companies can improve their sustainability performance and strengthen their commitment to stakeholder engagement, while also addressing challenges that may limit the effectiveness of women as directors in shaping environmental outcomes (Galbreath, 2011). However, according to Cambrea et al. (2023), the presence of women as independent directors does not directly impact ESGP. The researchers propose that female board members may be more effective in enhancing ESG outcomes if they assume advisory roles rather than strictly monitoring ones. Systemic barriers and biases often impede women directors from fully contributing to sustainable decisions, as male directors may exhibit sex-based biases that limit female influence on environmental matters (Galbreath, 2011). Recent studies suggest that a critical mass of at least two female directors on boards enhances decisionmaking processes and corporate responsiveness to stakeholder demands, particularly in addressing climate change impacts. Achieving this critical mass of female directors has been shown to significantly improve a company’s carbon performance, emphasizing the importance of increasing women’s representation on corporate boards for effective sustainability initiatives (Ben-Amar et al., 2017; Burkhardt et al., 2020; Number & Velte, 2021). 97 Corporate Law & Governance Review / Volume 6, Issue 2, 2024  98 These results suggest that increasing GD on corporate boards can have a beneficial impact on stakeholder relationships, accountability, and ethical conduct, ultimately leading to enhanced ESGP. Based on that, the fourth and fifth hypotheses can be formulated as follows: H4: Board gender diversity affects corporate ESG performance. H5: Board gender diversity moderates the relationship between corporate profitability and ESG performance. > Revisiting the relationship between corporate governance mechanisms and ESG disclosures in Saudi Arabia
Umar Habibu Umar, Egi Arvian Firmansyah, Muhammad Rabiu Danlami, Mamdouh Abdulaziz Saleh Al-Faryan 
Journal of Accounting & Organizational Change

ISSN: 1832-5912

Article publication date: 6 December 2023 

Issue publication date: 12 July 2024

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Abstract
Purpose
This paper aims to examine the effects of corporate governance mechanisms (board chairman independence, board independent director meeting attendance, audit committee size and audit committee meetings) on the environmental, social and governance (ESG) and its individual component disclosures of listed firms in Saudi Arabia.

Design/methodology/approach
The study used unbalanced panel data obtained from the Bloomberg data set over 11 years, from 2010 to 2020.

Findings
The findings indicate that board chairman independence (BCI) and audit committee size (AC size) have a significant negative and positive association with ESG disclosure, respectively. However, the results show that board independent director meeting attendance (BIMA) and audit committee meetings (AC meetings) do not significantly influence ESG disclosure. Regarding the individual dimensions (components), the results show that only BIMA has a significant negative association with environmental disclosure. Besides, only BCI and AC meetings have a significant positive association with social disclosure. Also, only BIMA and AC size have a significant positive and negative relationship with governance disclosure, respectively.

Research limitations/implications
The study used a sample of 29 listed companies in Saudi Arabia. Each firm has at least four years of ESG disclosures. Besides, the paper considered only four corporate governance attributes, comprising two each for the board and audit committee.

Practical implications
The results provide insights to regulators, boards of directors, managers and investors to enhance ESG and its components’ reporting toward the sustainable operations and better performance of Saudi firms.

Originality/value
This study is among the few that provide empirical evidence on how some essential corporate governance attributes that have not been given adequate attention by prior studies (board chairman independence, board independent directors’ meeting attendance, audit committee size and audit committee meetings) influence not only ESG reporting as a whole but also its individual dimensions (components).

Keywords
     

The authors thank the editors and reviewers for helpful comments and suggestions that significantly improved the quality of this study. The usual disclaimer applies.

Citation
Umar, U.H., Firmansyah, E.A., Danlami, M.R. and Al-Faryan, M.A.S. (2024), "Revisiting the relationship between corporate governance mechanisms and ESG disclosures in Saudi Arabia", Journal of Accounting & Organizational Change, Vol. 20 No. 4, pp. 724-747. https://doi.org/10.1108/JAOC-01-2023-0011

Publisher: Emerald Publishing Limited
Copyright © 2023, Emerald Publishing Limited <Board Composition and ESG Disclosure in Saudi Arabia: The Moderating Role of Corporate Governance Reforms
by Kaouther Chebbi 1,2,*ORCID andMohammed Abdullah Ammer 1,2ORCID
1
The Saudi Investment Bank Chair for Investment Awareness Studies, The Deanship of Scientific Research, The Vice Presidency for Graduate Studies and Scientific Research, King Faisal University, Al-Ahsa 31982, Saudi Arabia
2
Department of Finance, School of Business, King Faisal University, Al-Ahsa 31982, Saudi Arabia
*
Author to whom correspondence should be addressed.
Sustainability 2022, 14(19), 12173; https://doi.org/10.3390/su141912173
Submission received: 14 August 2022 / Revised: 10 September 2022 / Accepted: 16 September 2022 / Published: 26 September 2022
(This article belongs to the Section Economic and Business Aspects of Sustainability)
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Abstract
There is an evolving trend of pursuing the transfer to sustainable development. Owing to this trend, and alongside the increasing monitoring by society, companies are progressively considering this new position in the capital market. Corporate governance mechanisms and environmental, social, and governance (ESG) activities have received extensive consideration. Using a sample of Saudi listed companies, this study examines the association between board composition (size, independence, and gender diversity) and ESG disclosure moderated by corporate governance reforms. Our reported results confirm that the size of a board and its level of independence have positive and significant impacts on ESG disclosure. Moreover, board gender diversity is found to be positively but insignificantly related with ESG disclosure. When the individual dimensions of ESG are considered, the results verify the significant role of board size and board independence and the insignificant impact of board gender diversity in environmental and social disclosures. Interestingly, all measures of board composition have a positive and significant impact on the governance disclosure score. The results also show that reforms of Saudi corporate governance positively and significantly moderate the board size and board independence–ESG relationship. Our results demonstrate that the enhancement of companies’ corporate governance will increase their ESG disclosures. This study offers perceptions from the outlook of a developing economy, Saudi Arabia, and presents theoretical and managerial implications for policymakers and investors.
Keywords: board size; board independence; board gender diversity; corporate governance reforms; ESG; sustainability; Saudi Arabia
1. Introduction
The perception of sustainability is mentioned in the environmental, social, and governance (ESG) activities and practices of companies. The consideration of ESG concerns aids companies in preserving and enhancing their aptitude to generate value over the long term [1]. Motivated by the growing demand for socially responsible investment, ESG investing has become prevalent in international stock markets [2]. In line with the directions of the United Nations, as well as other organizations and agencies (i.e., Organization for Economic Cooperation and Development, European Union, Thomson Reuters Corporate Responsibility Ratings, Morgan Stanley Capital International, and Bloomberg), ESG factors are emerging and increasing rapidly on a worldwide scale. Together, governments and supervisory bodies around the world are gradually concentrating on ESG activities to safeguard customers and to develop better sustainable conducts through investors and corporations. Tan and Zhu [3] employed ESG rankings, which are important for enhancing green improvement and environment, to show that companies may be moving from focusing on financial returns to focusing on sustainable development. Increasing returns related to the financial performance of companies are boosted by ESG practices owing to the intensifying interests of the shareholders participating in these practices [4]. ESG disclosure is needed by socially responsible investors in order to check the ability of the company to fulfill their social benefits [5].
Currently, information on ESG is widely reported and attracts considerable investigation; however, studies are still in their infancy phase and the reported empirical results are mixed [6]. Remarkable research gaps with reference to ESG associations remain unanswered. Birindelli et al., [7] showed that studies investigating the connection between the mechanisms of corporate governance and ESG practices and disclosures are limited. Suttipun [8] also indicated that the connection between the mechanisms of corporate governance and ESG is still argumentative, making it a matter for additional examination. Specifically, the results of preceding studies related to the board composition–voluntary disclosure link are mixed and inconsistent (i.e., [9,10,11,12]). Despite the conducted literature on the board composition–ESG disclosure association, few works are existing in developing economies. Nevertheless, considerable consideration has mostly been directed toward developed markets [13]. For instance, Arayssi et al., [14] indicated that the research and debate on the influence of board composition on ESG disclosure in the Gulf Cooperation Council, where Saudi Arabia is a member state, are relatively low. Consequently, this debate still exists, particularly as the majority of stock exchanges worldwide are starting to provide investors alternative indexes related to sustainability. At the end of 2021, the Saudi Arabian Stock Exchange launched its first guidelines for ESG disclosures. Thus, the purpose of our study is to bridge the gaps in the literature between board composition and ESG in the Saudi capital market.
Well-established corporate governance has the ability to influence a company’s decision making related to strategies of ESG practices and disclosure [15]. Ying et al., [16] indicated that ESG issues are considered a responsibility of corporate governance. As an important corporate governance structure, the board of directors is recognized to control and observe management decisions and activities that engage society and provide direct and indirect advantages to all stakeholders. The board of directors is the most important internal mechanism of corporate governance, as it makes strategic guidelines, safeguards the benefits of all stakeholders, including the shareholders [17], and responds to community pressure to obtain its acceptance [14]. It is the tool mainly accountable for the success or failure of a company [7] and plays an essential role in constructing sustainable strategies and monitoring their implementation [18]. Thus, the link between board structure and management strategies (i.e., ESG) is presently an imperative subject of investigation [19]. To this end, the first question that we seek in this study to answer is as follows: does board composition (measured by board size, board independence, and board gender diversity) affect the ESG disclosure score?
Corporate governance reforms have been launched by various developed and developing markets to reinforce the protection of investors [20]. These reforms via national supervisory bodies are considered thoughtful involvements in the corporate governance practices of a company [21]. During the last years, reforms to the board of directors have been carried out to build up the instruments by which investors can certify their investments’ return. Liao et al., [22] indicated that most conducted reforms were concentrated on the practices related to the board of directors. Fauver et al., [23] showed that the main reforms to the board of directors employed in several countries in the last two decades have improved the wealth of shareholders, indicating the significance and efficiency of such reforms.
Starting in 2000, the regulations of Saudi corporate governance have made an indispensable improvement by issuing internal control guidelines. Later, in 2006, the Saudi Capital Market Authority issued the first code of corporate governance. This code was voluntary until 2010, when it moved to be mandatory. The last reforms to the Saudi code of corporate governance were implemented in 2017. These reforms focused on many issues, such as (a) the relationship between companies’ board of directors, shareholders, and management; (b) rights of shareholders; (c) requirements related to board composition and its associated committees; (d) requirements concerning internal control and external auditors; (e) comprehensive provisions that oblige boards of directors to disclose all needed information to shareholders and those who deal with the company to enable them to build their investment strategy or their dealings with the company.
In Articles 87 and 88 of the new 2017 code, social responsibility and social initiatives received some emphasis. However, ESG practices refer to wide-ranging concerns that are mainly associated with stakeholders rather than with shareholders. Accordingly, on a theoretical level, it is not expected that these 2017 reforms—which mainly deal with board issues—will directly influence the ESG practices and disclosure of companies. Thus, these debates propose that the eventual outcome of corporate governance reforms on ESG is still an open practical question. Furthermore, since the reforms of corporate governance are usually carried out to diminish agency conflicts among company insiders and external shareholders [22], the perception of agency cost concerning ESG would lead to a reduction in ESG activities and disclosures after reforms. That is, the reforms will constrain the management from ESG practices that would boost their position with the main stakeholders at the expense of the company’s shareholders [24,25]. Nevertheless, if it is possible for ESG activities to increase shareholder value as advocated by the standpoint of “doing good leads to doing well” [26], then ESG practices and reporting should be increased after reforms. Inspired by these conflicting prospects, the second question this study empirically investigates is as follows: do 2017 corporate governance reforms have a moderating role on the board composition/ESG disclosure relationship?
The motivations for conducting this study in the context of Saudi Arabia are as follows: First, corporate governance in Saudi Arabia has undergone considerable improvement since the first code was issued in 2006. Second, the board of directors of Saudi Arabian companies is controlled by families, governments, and royal family members, who may provide access to an extensive network for the companies and enhance their financial outcomes; nevertheless, Arayssi et al., [14] indicated that these boards will likely have deficiency to support social strategies and release their social accomplishments. Third, Saudi Arabia is one of the G20 countries and considered one of the leading oil exporters worldwide. Fourth, in line with Saudi Vision 2030, the capital market in Saudi Arabia is observing a fast improvement and the government is carrying out significant efforts to entice foreign investments and move from an oil economy to a well-diversified one. Indeed, sustainable concern is positioned at the heart of Vision 2030. This was the incentive for the Saudi Exchange to enhance ESG practices and disclosure within the Saudi capital market, specifically after issuing the ESG disclosure guidelines at the end of 2021 [27]. These mentioned motivations make the Saudi market attractive for researchers, principally regarding issues related to corporate governance and sustainability. Therefore, our study may provide unique and different outcomes from those that have been reported thus far in other countries.
To this end, by utilizing a sample of 38 Saudi companies (241 company year observations) covering the period from 2015 to 2021, we find that both board size and board independence are significantly and positively associated with ESG disclosure. By contrast, board composition related to board gender diversity has a positive but insignificant effect on ESG disclosure. Concerning the influence of board composition on the separate factors of ESG, the findings confirm the substantial role of board size and board independence and the insignificant outcome of board gender diversity in environmental and social disclosures. Remarkably, all items of board composition have a positive and significant impact on the governance disclosure score. Finally, the significant and positive moderating influence of corporate governance reforms on the board composition (board size and board independence)–ESG association is confirmed.
This study contributes to the present literature in many areas. First, it adds to and enriches the narrow but increasing literature related to corporate governance and ESG disclosure in an emerging market, namely Saudi Arabia, by empirically examining the connection between board composition and ESG disclosure. Mixed and ambiguous results regarding this connection have been obtained [22,28,29]. This deficiency of stability in the previous outcomes calls for additional examination to aid in better recognizing this connection. Second, the outcomes of our work provide support to the underpinning theories for this study (i.e., agency theory, resource dependence theory, institutional theory). Third, this study adds to the prevailing evidence on the link between national bodies and companies’ board structures and ESG. Specifically, it examines the ways in which the Saudi Capital Market Authority boosts or confines the ESG practices and disclosures. To date, there is no reported evidence concerning the moderating impact of corporate governance reforms on the association between board composition and ESG disclosure. Accordingly, this study evaluates the 2017 corporate governance regulations. Fourth, most prior studies on corporate governance and ESG focused on developed markets associated with well-structured corporate governance and advanced ESG practices and disclosure. However, insufficient evidence has been reported in emerging countries such as Saudi Arabia. This insufficiency of empirical work can be attributed to the inadequate disclosure of ESG. Thus, this study contributes to filling the abovementioned gaps in the current literature in an emerging ground concerning social sustainability. Finally, the outcomes of this work provide various implications to regulators, policymakers, management of listed companies, and investors.
The rest of this paper proceeds as follows: The review of the literature and the development of the hypotheses of this study are presented in Section 2. The study’s methodology, including sample, data, measurements, and models, are illustrated in Section 3. Descriptive analysis, Pearson’s correlation, results of regression analysis, additional analysis, and robustness analysis are presented and discussed in Section 4. The discussion related to the found results is illustrated in Section 5. Lastly, we conclude the study and show the theoretical and practical implications as well as the limitations and propositions for future works in Section 6.
2. The Literature Review and Hypothesis Development
2.1. Board Size and ESG Disclosure
Board size represents the total of all directors working on the company’s board of directors, and it is considered one of the main attributes that impacts board performance and efficiency. The resource dependency theory is commonly employed in works related to the board of directors and is better in recognizing the board [30]. The theory postulates that the presence of many members working on the board of directors will empower companies to reach wide-ranging and indispensable resources in their boards, thus permitting them to make more sound and operative decisions when they come across challenges in the globalized economics [31]. The increasing number of directors on the board likewise offers better proficiency and external networks for the board [32].
Much empirical evidence has found that board size is positively related to ESG disclosure [8,18,33,34]. The results were attributed to the ability of a larger board size to enhance the quality and quantity of reported financial and non-financial information [35]. Furthermore, in their study on banks, Birindelli et al., [7] reported a favorable link between the board size and ESG performance. In the same vein, Esa and Gzahali [36] reported a positive outcome for the board size of Malaysian companies on their disclosures of corporate social responsibility. Likewise, Allegrini and Greco [37] found a strong and positive influence for board size on the governance disclosure of Italian companies. Thus, the general results reveal that board composition (board size) has a substantial task related to ESG disclosure.
A larger board size will raise the transparency of disclosed non-financial information by increasing the capability of the board to observe the actions and activities of management [38]. The increasing number of board members can offer a wide-ranging impersonation of ownership and make them more inclined to report information concerning strategic goals, aside from all other information that can be valuable for stakeholders [39,40]. In agreement with the resource dependence theory and the above empirical evidence, we assume that more board members will positively impact the level of ESG disclosure. Thus, the following hypothesis is presented:
Hypothesis 1 (H1). The size of the board of directors is positively associated with the ESG disclosure scores of Saudi listed companies.
2.2. Board Independence and ESG Disclosure
The independent members sitting on boards of directors are anticipated to influence the efficiency of the boards [41]. The core foundation of the agency theory is that the non-executive directors on the boards are supposed to supervise and control the actions of the executive directors because of the latter’s expected opportunistic conduct [42,43]. More independent members on boards will motivate and encourage management toward the direction of advanced disclosures and transparency to safeguard the interests of stakeholders [44]. Independent directors can guide the decisions of company management to sustainable activities with higher financial returns, thus increasing the company stock value. More independent directors will also lead to sound decisions and motivate the management for greater disclosures of ESG [45].
Empirically, several studies have shown the positive connection between board independence and ESG disclosures [33,34,46]. Another set of evidence reported a positive connection between independent directors on boards and companies’ social responsibility disclosures [47,48], environmental disclosure [49], and disclosure about corporate governance practices [50,51].
More board independence simplifies the communication of the constructive appearance of the company by enlightening its social responsibility as well as balancing between its financial objectives and its social responsibilities [14]. Karamanou and Vafeas [52] and Cheng and Courtenay [53] reasoned that enhanced corporate governance results in more and improved qualities of non-financial disclosures. Corresponding to the agency theory and the preceding literature, it is expected that more independent directors will tend to facilitate the ESG disclosure to send the signal that the company is considering social interests and is not focusing only on financial outcomes. Thus, we state the next hypothesis:
Hypothesis 2 (H2). The independence of the board of directors is positively associated with the ESG disclosure scores of Saudi listed companies.
2.3. Board Gender Diversity and ESG Disclosure
Diversity on a company’s board of directors represents the potential dissimilarities among the board members and the way in which this diversity may impact the decision-making process in the company [54], including decisions on ESG activities [15]. As an important feature of board composition, gender diversity is frequently claimed to have a favorable influence on the quality of a company’s strategic decision [55]. In the 2030 Agenda of the United Nations, gender equality is the fifth goal of sustainable development, which considers comprising an equivalent existence in management positions [19].
The viewpoint of the resource dependence theory as designated by Hillman et al., [56] is that, since the board of directors manages the correlated responsibilities between the company and its outside environment, greater diversity on the boards (i.e., a higher fraction of women directors) will enable further selections of opportunities and networks for the company. Women directors enable boards to have innovative experiences that offer new notions and propositions [56]. Ammer and Ahmad-Zaluki [57] revealed that the presence of females on boards will enhance the attendance of the board. Furthermore, a board diversified with women directors has an increased obligation toward ethics and a stronger inclination to consider the interests of a wider range of stakeholders and societies [58]. Female directors appear to retain a positive outlook concerning sustainability [7].
On the empirical front, including women on the board of directors is found to be positively related with ESG disclosure [19,34,46,59,60], carbon information disclosure [61], and environmental disclosure [39,49]. This evidence proved that women directors advance the disclosure of companies through enhanced monitoring, in addition to the constructive inspirations of the companies’ socially responsible manners. The ability of a company to attain the essential resources to undertake its social and environmental responsibility is also higher with gender diversity [19]. Thus, we assume that the higher commitment and skills of female directors enhance the ESG disclosure of the company while realizing profitability. Thus, consistent with the resource dependence theory and the prior literature, we state this hypothesis:
Hypothesis 3 (H3). The gender diversity of the board of directors is positively associated with the ESG disclosure scores of Saudi listed companies.
2.4. Corporate Governance Reforms and the Board Composition–ESG Disclosure Relationship
Corporate governance reforms represent the intentional interferences in the code of corporate governance by the governments or stock exchange commissions. The particulars of corporate governance reforms differ between countries, but increasing transparency is the essential aim of these reforms [62], aside from protecting investors [21]. Developed and developing markets have faced various governance problems (e.g., the Asian financial crisis in developing markets) and scandals (e.g., Enron and WorldCom insolvencies in developed markets), which emphasized the need for corporate governance reforms [21].
On the empirical front related to corporate governance reforms, [22] found that global reforms for corporate boards boosted corporate social responsibility, specifically the items related to the environment and social activities. They further reported that board reforms may enhance the probability of incorporating the practices of corporate social responsibility in executive compensation. In India, Abraham et al., [63] found that companies increased their disclosure after modifications to Clause 49. Additionally, Liao et al., [20] documented that there are higher expectations for companies in countries that applied corporate governance reforms to cross-list in other countries that have robust protection for investors and well-established markets. In their study, Bae et al., [21] found that the reforms of corporate governance resulted in companies paying greater dividends. They hypothesized that the corporate board reforms reinforce the observing task of the board and authorize outside investors to ask management to disgorge dividends.
Orazalin and Mahmood [64] also demonstrated that the quality of country governance (calculated by the effectiveness of government, monitoring quality, and guidelines of law) has a positive influence on environmental practices. Ortas et al., [65] reported that national organizations have a robust effect on the ESG performance of companies. Furthermore, many earlier works indicated that corporate governance reforms can influence the values and decision making of companies (i.e., [21,23]). By contrast, Ahmed [62] found that the quality of earnings was not influenced by the 2002 corporate governance reforms in Russia.
In Saudi Arabia, there are few regulatory reforms dedicated to corporate governance since its code was issued in 2006. However, after launching Saudi Vision 2030 in 2016, the Saudi Capital Market Authority launched its governance reforms in 2017 to enhance the role of listed companies in the national economy. As mentioned in the Introduction, these reforms concentrated on matters such as rights of shareholders, board structure and its sub-committees, internal control and external auditors, and disclosures. For sustainability issues, Article 87 of the 2017 Saudi code of corporate governance, titled “Social Responsibility”, indicates that “The Ordinary General Assembly, based on the Board recommendation, shall establish a policy that guarantees a balance between its objectives and those of the community for purposes of developing the social and economic conditions of the community.” Additionally, Article 88, which is titled “Social Initiatives”, indicates that “The Board shall establish programmes and determine the necessary methods for proposing social initiatives by the Company…” [66].
In line with the assumption of Liao et al., [22], the positive estimation of ESG proposes that improved corporate governance following conducted reforms will inspire companies to raise their ESG to increase the value of its shareholders. Along with this estimation, it is reported that companies with well-established governance and low agency problems participate in more corporate social responsibility activities [67,68]. Healthier corporate governance could also reinforce the effect of independent directors to prompt more investing in ESG practices as these appreciate the social impact of the company. Shareholders actually require an operative mechanism of corporate governance to have better controlling rights and to enhance the environmental sustainability of the company [69]. Based on the institutional theory, companies increase and safeguard their legality [70] through compliance with the anticipations of authorities and stakeholders. Meyer and Rowan [71] showed that the companies follow the prescriptions of authorities by aligning the values of the corporation and the community.
According to the above discussions and prior studies, we assume that corporate governance reforms have a positive effect on the board composition–ESG disclosure relationship. We thus formulate the following hypotheses:
Hypothesis 4a (H4a). The board size–ESG disclosure association is positively moderated by corporate governance reforms.
Hypothesis 4b (H4b). The board independence–ESG disclosure association is positively moderated by corporate governance reforms.
Hypothesis 4c (H4c). The board gender diversity–ESG disclosure association is positively moderated by corporate governance reforms.> <Environmental social governance: a core value to responsible stakeholders and stock market sustainability in the Kingdom of Saudi Arabia
Cite this article https://doi.org/10.1080/20430795.2020.1827602 CrossMark LogoCrossMark
 
ABSTRACT
Environmental social governance (ESG) is a framework that assists global financial services in developing strategic ways to hedge operating and financial risks and move toward achieving United Nations’ SDGs. Stakeholders consider ESG as a core value while strategizing their investment decisions in the capital market as these factors have the leveraging potential for risk return trade-off, although they are difficult to measure in financial terms. In the volatile capital markets across the globe, the ability of corporate business models to adapt to changes in the economic environment demands the consideration of ESG reporting by the external stakeholders. Thus there is rising demand for ESG reporting and analysis by external stakeholders, including stock exchanges, investors, financial analysts, and corporations, because they have the leveraging potential for risk return trade-off and for sustainable development. The present study analyzes the ESG scores for all the shares listed in the Tadawul All Share Index (TASI) based on selected ranking tools. The analyzed result reveals the current sustainability landscape of businesses in KSA and suggests how responsible investors can uncover value of investment through ESG and how the benefit of this reliable, consistent, and relevant metrics fosters long-term stock market sustainability. The results of the study will enable investors to strategize their capital market-related investment decisions. The result of analysis reveals the current sustainability landscape of businesses in KSA and suggests how responsible investors can uncover value of investment through ESG scores as they consider the material components that affect corporate and investment performance.>  based on these studies my supervisor has asked me to create a research proposal where my proposed research Methodology should be either only purely Qualitative or Mixed Method. I would prefer for your to keep it purely qualitative using MAXQDA or thematic analysis in excel based on the existing review of literature for example <systematic overview employed a comprehensive methodology to synthesize and evaluate existing literature . The study adopted a systematic review approach to gather, assess, and synthesize data from various scholarly sources, reports, and successful case studies.
A meticulous and structured search strategy was formulated to collect relevant literature from databases, academic repositories, and grey literature sources. Keywords related to, successful case
studies, and pertinent policy interventions were utilized to ensure comprehensive coverage of the subject matter. The inclusion and exclusion criteria were rigorously applied to screen and select articles and reports for relevance and quality.
Data extraction encompassed critical information from selected studies, including methodologies, key findings, successful case studies, policy interventions, and gaps in existing knowledge. A structured framework was utilized to ensure uniformity in data collection. The analysis phase involved categorizing and synthesizing information from the retrieved literature. Successful case studies were scrutinized to extract valuable insights and exemplary strategies employed to . An integrative approach was adopted to consolidate findings across diverse studies and case reports.
A rigorous quality assessment was conducted to evaluate the reliability and validity of the included studies and case reports. This process ensured the inclusion of robust and credible information, enhancing the overall integrity of the review. The findings from the systematic overview were organized and reported in a coherent manner, highlighting key themes, successful interventions, gaps in knowledge, and areas requiring further exploration. Where applicable, graphical representations and tables were employed to enhance the clarity and accessibility of information.>  
Also my supervisor mention to make use of one of the following research theories of Corporate Governance Theories out of (1- Agency Theory , 2- Shareholder Theory , 3- CSR Theory , 4- Stockholder Theory ) read and  research about it , then decided which you are going to choice and let me know
Do not use words like ⁠Forward-Looking ESG and Sustainable ESG Practices as variables since these are not formal or standardized academic terms , and your research question must be specific about sector for example: ( Governance Practices in Saudi Arabia / Governance Practices in GCC Countries) . Based on the above literature supplied infer a research gap and create your research aim, research hypotheses and research problem along with a conceptual framework to identify variables (independent, dependent, mediator, moderator) and to show relationship between them that formulated research hypotheses to be tested. Abstract

Clarity, succinctness, and ability to effectively summarize the research, including the purpose, methodology, results, and conclusions (5 marks) (1 page enough?)
Chapter 1: Introduction
1.1 Research Background (1 page enough) 1.2 Research Problem (1 page enough) 1.3 Aim of the research, Research question and sub-questions
1.3.1 Aim of the research (4 or 5 lines enough)
1.3.2 Research question (Only write the question)
1.3.3 Sub research questions (Only write the questions) 1.4 Research Significance
1.4.1 Theoretical Contribution (5 lines)
1.4.2 Industrial Contribution (10 lines)
Chapter 2: Literature Review in detail
Add the Conceptual framework and explain the link between figures (6-7 lines enough?)
2.1 ........ 2.2 ........ 2.3 ........ 2.4 ........ 2.5 ........( based on variables)
Chapter 3: Methodology 3.1 Research Design 
3.4 Data Collection Method
3.5 Data Analyzing Procedures (20 lines – two paragraphs)
3.5.2 Phase 2: Generating initial codes (7 lines enough?)
3.5.3 Phase 3: Reviewing Themes
3.5.4 Phase 4: Defining Themes
3.5.5 Phase 5: Write-up
 thematic analysis table with main themes, sub-themes, and codes. Write research problem in this format for statement <The problem is that healthcare administrators in the United States face significant challenges in implementing value-based care (VBC) models within their organizations. There is a problem in the healthcare sector, specifically concerning the transition from traditional fee-for-service (FFS) models to VBC models. Currently, many healthcare organizations are struggling to shift their operational frameworks from volume-based to quality-focused care, encountering obstacles such as inadequate resource allocation, resistance to organizational change, and complex policy compliance requirements (Scott, Taylor, & Thompson, 2016; Lindner, 2023; Pittman, Smith, & Brown, 2021). This problem affects a broad population, including healthcare organizations like hospitals, clinics, and long-term care facilities, as well as their staff, patients, and the overall healthcare workforce (McKinsey & Company, 2023).> remember it should be rigorous to PhD doctoral standards and use TITLE-ABS-KEY((("Corporate Governance" OR ESG OR "Governance Practices" OR "Governance") AND ("Saudi Arabia" OR "GCC Countries" OR "Gulf Cooperation Council")) OR 
("Agency Theory" OR "Shareholder Theory" OR "CSR Theory" OR "Stockholder Theory") OR ("Digital Governance" OR "Data Governance") AND (PUBYEAR > 2014 AND PUBYEAR < 2025))