An examination of board diversity and corporate social responsibility disclosure: evidence from banking sector in the Arabian Gulf countries

• DOI: https://doi.org/10.1108/IJAIM-07-2021-0137
• Published date: 28 October 2021
• Date: 28 October 2021
• Pages: 22-46
• Subject Matter: Accounting & finance,Accounting/accountancy,Accounting methods/systems
• Author: Ayman Issa,Mohammad A.A. Zaid,Jalal Rajeh Hanaysha,Ammar Ali Gull

An examination of board diversity

and corporate social responsibility

disclosure: evidence from banking

sector in the Arabian Gulf countries

Ayman Issa

School of Accounting, Dongbei University of Finance and Economics, Dalian, China

Mohammad A.A. Zaid

School of Accounting, Dongbei University of Finance and Economics,

China Internal Control Research Center, Dalian, China

Jalal Rajeh Hanaysha

School of Business, Skyline University College, Sharjah, UnitedArab Emirates, and

Ammar Ali Gull

Ecole Supérieure des Sciences Commerciales d’Angers (ESSCA), Lyon, France

Abstract

Purpose –The purpose of this study is to examine the impact of boarddiversity (e.g. education, gender,

nationality and royal family members) on voluntary corporate social responsibility (CSR) disclosure for a

sample of banks listedin the ArabianGulf Council countries.

Design/methodology/approach –The authors use the Global Reporting Initiative guidelines to construct

the CSR disclosure index. The empiricalanalysis is based on the data of banks listed in the Gulf Cooperation Council

countries over the period 2011–2019. To tackle the potential issue of endogeneity, the authors apply the system

generalized method of moments (GMM) estimationapproach to investigate the relationship between board diversity

and CSR disclosure index.

Findings –The f‌indings of the analysis show that there is a signif‌icant relationship between board

diversity and the level of voluntary CSR disclosure.Specif‌ically, the authors f‌ind that diversity captured by

the education level, nationality and the presence of royal family members on board is positively associated

with the level of voluntary CSR disclosure while diversity captured by the gender of board members is

negativelyassociated with the level of voluntary CSR disclosure.

Practical implications –The regulators, policymakers,stakeholders and the board of directors become

aware of the diversity mechanisms that must be used to promote CSR practices in the banking sector of

Arabian Gulfcountries.

Originality/value –The authors extend the existing literature by providing empirical evidence on the

association between board diversity and voluntary CSR disclosure practices of banks operating in the

Arabian Gulf countries. Thisstudy also highlights that board gender diversity may have a different impact

on voluntary CSRdisclosure between developed countries and developingcountries. This paper also provides

preliminary evidence on the importance of education level, the presence of foreign and royal directors on

board to inf‌luenceCSR practices of banks operating in the Arabian Gulf countries.

Keywords Corporate governance, Arabian Gulf region, Corporate social responsibility (CSR),

Board diversity, Arabian Gulf countries

Paper type Research paper

Declaration of competing interest: The authors declare that they have no conf‌lict of interest.

IJAIM

30,1

22

Received8 July 2021

Revised30 August 2021

Accepted12 October 2021

InternationalJournal of

Accounting& Information

Management

Vol.30 No. 1, 2022

pp. 22-46

© Emerald Publishing Limited

1834-7649

DOI 10.1108/IJAIM-07-2021-0137

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1834-7649.htm

1. Introduction

Corporate social responsibility (hereafter CSR) has gained considerable attention from

practitioners and academicians in the last couple of decades. CSR is a modern management

concept which posits that f‌irms not only fullymeet the legal obligations but also they have

ethical responsibilities to surpass the legal requirements and pursue societal welfare

voluntarily (Beji et al.,2020). The past two decades have witnessed a signif‌icant increase in

CSR engagement, with the prime motive to address the expectations of stakeholders

(Campbell, 2007). CSR mainly consists of three pillars, namely, social, economic and

environmental responsibility that can be achieved via the development of environmental

protection practices and via the exercise of actions that improve a f‌irm’s relationship with

the community to generate the desired benef‌its and satisfy the wishes of different

stakeholder groupswho affect and are affected by it (Waddock, 2003;Adams, 2002).

CSR makes it necessary for f‌irms to f‌ind a balance between f‌inancial and non-f‌inancial

goals and to assume a higher level of transparency and accountability by releasing specif‌ic

reports on their economic, environmental and socialactivities (Fern

andez-Gago et al.,2018).

CSR disclosure is an important way for providing transparent information to business

stakeholders (Rao and Tilt, 2016b). Thus, effective CSR management should lead to

voluntary CSR disclosure as a complement to classical f‌inancial accounting reports.

Corporate annual reports may include detailed information about CSR practices that cover

environmental, social and governance issuesaccording to widely recognized CSR reporting

standards, such as the Global ReportingInitiative (GRI) guidelines (Velte, 2017).

The existing literature on determinants of CSR disclosure suggests that governance

quality signif‌icantly inf‌luences the level of CSR reporting (Wasiuzzaman and Wan

Mohammad, 2020;Issa and Fang,2019;Chang et al., 2017;Rao and Tilt, 2016a;Harjoto et al.,

2015;Boulouta, 2013;Bear et al.,2010). Specif‌ically, the impact of the board of directors on

CSR practices has received special attention (Fern

andez-Gago et al.,2018). The board of

directors is the ultimate decision-making body in corporations and also affects CSR

practices because the board of directors is responsible for satisfying the needs of different

stakeholder groups through the demonstration of CSR practices, by monitoring and

controlling manager’s self-serving behavior, approving strategic plans related to CSR, and

creating special board committees for CSR (Chang et al.,2017;Jain and Jamali, 2016;Walls

et al.,2012). Therefore, the board of directors plays an important role in promoting CSR

practices and improving transparency by reporting f‌inancial and non-f‌inancial information

to key business stakeholders.

A growing body of research advocates that board diversity may serve as an important

mechanism to promoteCSR disclosure (Cucari et al., 2018;Li et al., 2017;Galbreath, 2016;Al-

Shaer and Zaman, 2016;Landry et al.,2016;Harjoto et al.,2015;Jizi et al., 2014;Boulouta,

2013;Zhang et al.,2013;Ntim and Soobaroyen, 2013;Bear et al.,2010). However, most of

these studies were conducted in the context of developed western countries. The empirical

research on the relationship between board characteristics, particularly, board composition

and CSR reporting in the context of developing countries, especially in the Arabian Gulf

region is still scant (Harun et al.,2020;Arayssi et al.,2020;Alazzani et al.,2019;Issa and

Fang, 2019;Bukair and Rahman, 2015). Specif‌ically, little is known about board

characteristics and CSR disclosure in the context of Arabian Gulf banking sector. The

developing economies,such as the Arabian Gulf countries are characterized by concentrated

ownership and control, less protection of shareholders’rights, ineff‌icient decision-making

processes, and the existence of weak corporate governance systems (Young et al.,2008;

Kaymak and Bektas, 2008). Therefore, the roles and expectations from corporate boards

may have a signif‌icant difference, and consequently, the relationship between board

Corporate

social

responsibility

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