The impact of overseas qualifications and work experience of board members on corporate environmental disclosures: evidence from Vietnam
Creators: name: LE, Hang
Publisher: name: RMIT University
Year: 2024
Subjects: classificationCode: 350107
subject: Sustainability accounting and reporting

description: As the impact of global climate change becomes more evident, corporate environmental disclosures (CED) are becoming more significant (Eccles, Serafeim &amp; Krzus 2011; Lee 2017; Lewis, Walls &amp; Dowell 2014). In emerging countries where a focus on fast economic development has often resulted in substantial degradation of the environment (Doan 2017; Nguyen &amp; Pham 2012; Tran, Bui &amp; Le 2019), one would expect to see a rise in environmental-related reporting by firms.

Although the factors at the micro-level, such as organisational culture and board characteristics could influence CED, to date, little research has been published on these impacts on CED within emerging countries (Ali, Frynas &amp; Mahmood 2017; Corvino, Doni &amp; Bianchi Martini 2020; Kilincarslan, Elmagrhi &amp; Li 2020; Oserogho 2020a; Rathnayaka 2018). Specifically, studies of CED in emerging nations tend to mainly focus on a narrow range of countries: Malaysia, India, South Africa, Bangladesh, and China (Ali, Frynas &amp; Mahmood 2017; Corvino, Doni &amp; Bianchi Martini 2020; Fifka 2013; Ismail &amp; Latiff 2019; Rashid 2020). Meanwhile, public awareness of environmental impact is relatively low in these countries (Lu &amp; Abeysekera 2015b; Situ &amp; Tilt 2018). Studies of the factors that impact CED are vital to understanding what is going on within these nations and ultimately, increasing the level of transparency.

Vietnam is the largest socialist country in Southeast Asia; the Communist Party of Vietnam has monitored and controlled all aspects of business and life for many decades (Benedict 2019; Nguyen, Tran &amp; Ha 2020). Although Vietnam is one of Southeast Asia's fastest-growing economies, the country has faced significant environmental challenges, which present many critical concerns to the Vietnamese government and its people (Doan 2017; Nguyen &amp; Pham 2012; Tran, Bui &amp; Le 2019). In addition, Vietnam, which possesses relatively weak regulatory and corporate governance, is one of the major transitional countries within Asia (Hai &amp; Nunoi 2008; Vu &amp; Buranatrakul 2017; WorldBank 2013b). Importantly, Vietnam's political system, economy and culture are very different from other countries in which the State dominates the economy and the market. Two significant outcomes, which resulted from Vietnam's economic growth, reforms and history are increased numbers of Vietnamese studying overseas and a rising influence from Western cultures (Oliver &amp; Nguyen 2010; Varghese &amp; Martin 2013). Reflecting these two factors above, the present study examines two potential board characteristics that may impact positively on CED practice: overseas qualifications and work experience of board members. In the second phase of the study, the impact of national culture on the link between boards' overseas study and CED are also investigated. It should be noted that environmental disclosures in Vietnam have been voluntary. The sample for this research consists of 260 large Vietnamese listed firms (VLFs) over a four-year period (2013-2016). The present study used a quantitative analysis approach to test hypotheses regarding a nexus between board backgrounds, national culture and CED.

The key findings from the present research are as follows. Firstly, it was found that board members' overseas qualifications significantly and positively impacted the level of CED. Chairs of boards studying overseas also positively influenced CED, which suggests they possess substantial power over VLFs due to their high percentages of ownership. Further, findings of this study highlight the geographic regions where board members earned their qualifications significantly affected the level of CED. Specifically, firms with board members who had previously studied in Anglo Cluster countries such as the United States (US), United Kingdom (UK) and Australia were significantly more likely to possess higher levels of CED than firms where board members studied locally or in other regions. Meanwhile, board of directors (BoDs) who studied in Confucian Asia were unlikely to change their perception of CED on their return to home country. Another interesting finding is that the types of overseas qualifications awarded to BoDs does matter. Specifically, results of the present study indicate that companies with BoDs possessing overseas law qualifications were significantly less likely to disclose environmental information whereas companies with board members possessing overseas MBAs were more likely to possess higher levels of CED.

In addition, a surprising finding is that overseas work experience did not significantly impact on CED levels. This is not consistent with prior studies, such as Carpenter, Sanders and Gregersen (2001); Zhuang, Chang and Lee (2018), and reveals that foreign education may have more substantial effects on CED in Vietnam than international work experience due to the historical circumstances of Vietnam. Since most scholarships funded by developed countries require Vietnamese awardees to return to their home country and use their overseas skills to contribute to Vietnam's development, this has resulted in a small percentage of BoDs working abroad. Another unexpected finding is that the levels of foreign qualifications (e.g., PhD, Master, Bachelor) were not statistically significant in explaining CED, which reflects the distinct characteristics of board members' overseas education in Vietnam.

Regarding the impact of cultural dimensions on the link between overseas education and CED, possession of board members who studied in high future orientation  or institutional collectivist  or human orientated  countries significantly and positively influenced the levels of CED. Meanwhile, possession of board members who studied in high assertiveness  countries significantly and negatively influenced the levels of CED.

Results of the present study indicate that CED was very low in Vietnam across the study period from 2013 to 2016. Surprisingly, the level of CED in Vietnam was lower than that found in other emerging countries (e.g., China, Iran, India) (Alipour et al. 2019; Cheng et al. 2017; Garg &amp; Kumar 2018; Wang et al. 2019b). This finding suggests that management of VLFs tends to ignore the interests of external stakeholders who may be interested in CED levels, or owners and investors of VLFs may be less interested in CED levels than firms in other countries.

The present study makes noteworthy contributions to theory, practice and the literature. First, this research sheds new light on Upper-Echelons Theory (UET) (Hambrick 2007; Hambrick &amp; Mason 1984) in the context of transitional economies where overseas study resulting in exposure to different cultural views positively influenced Vietnamese BoDs' perspectives on CED. Second, findings that emerged from this research are relevant to both practitioners and policymakers. The results of this research suggest that voluntary disclosure is not effective and thus needs to be mandatory in countries where low stakeholder orientation exists (Vu &amp; Buranatrakul 2017). The Vietnamese government also needs to simplify its administrative procedures to encourage public engagement (e.g., NGOs) in environmental management. Further, the insights gained from this study suggest that shareholders can appoint board members, especially Chairs and independent directors, that possess international qualifications to enhance sustainability reporting. Third, this study adds to the literature about the impact of Western cultural traits of board members on the level of environmental reporting within a transitional economy.