Board involvement in corporate sustainability reporting: evidence from Sri Lanka

• Published date: 03 December 2018
• Date: 03 December 2018
• DOI: https://doi.org/10.1108/CG-10-2017-0252
• Pages: 1042-1056
• Author: Nayana Chandani Swarnapali Rathnayaka Mudiyanselage
• Subject Matter: Strategy,Corporate governance

Board involvement in corporate

sustainability reporting: evidence

from Sri Lanka

Nayana Chandani Swarnapali Rathnayaka Mudiyanselage

Abstract

Purpose –The purpose of this paper is to explorethe role played by the board of directors in corporate

sustainability (CS) disclosure within the Asian context in which sustainability reporting (SR) is an

emergingphenomenon.

Design/methodology/approach –Data are collectedfrom a sample of 100 listed Sri Lankan companies

over a period of four years (2012-2016), representing practically all the business sectors. This study

draws on both agencyand resource dependence theories, whilebinary logistic regression is performed

for the dataanalysis.

Findings –The results point out that firms that follow a sustainability disclosure policy have larger

boards, a higher proportion of independent directors and more female directors. Contrary to certain

common assumptions,firms that practice sustainabilitydisclosure are not influenced by dualleadership,

board ethnicity and board ownership. This study helps firms to understand whether their boards can

influence the sustainability disclosure choice or not and further, to validate the appropriateness of the

agencytheory and the resource dependence theoryfor examining issues of this nature.

Originality/value –This study contributes significantly to the extant literature on this subject by

broadening the geographical coverage, which has generally been limited to the West in corporate

disclosurestudies.

Keywords Corporate governance, Board of directors, Sustainability, Corporate social responsibility

Paper type Research paper

1. Introduction

Challenges faced in taking forward sustainable development have become a major issue

across the world. The importance of abiding by business ethics and following the

sustainable path are universally acknowledged as dire needs at present as the societies

and economies of all countries areclosely interconnected and interdependent and so have

to follow the same practices (Banai and Sama, 2000;Kolk and Van Tulder, 2004).

Developing countries are struggling to share in the global economic prosperity within a

shrinking environmental and ecological space, and depleting resources. In such a

backdrop, many big business corporations that contributed to the global economic

expansion and technological progresshave been criticized for the serious negative impacts

they have had on social and environmental issues, such as waste, pollution, rapid resource

depletion and so on (Reverte, 2009). Stung by such criticism, firms have been increasingly

motivated to become accountable (Raoet al.,2012) not only to the shareholders but also to

the larger set of stakeholders includingtheir customers and even the public (Reverte, 2009;

Zhang, 2012). Nature of corporate governance (CG) has a decisive effect on sustainability

and related disclosures, and this nexus has become the topic of a lively debate in the

recent corporate literature. As a matter of fact, the board of directors’ role as the main

Nayana Chandani

Swarnapali Rathnayaka

Mudiyanselage is based at

School of Management,

Huazhong University of

Science and Technology,

Wuhan, China and

Department of

Accountancy and Finance,

Rajarata University of Sri

Lanka, Mihintale, Sri Lanka.

Received 19 October 2017

Revised 8 January 2018

Accepted 26 March 2018

The author would like to

express her gratitude to

Associate Professor Luo Le,

School of Management,

Huazhong University of

Science and Technology,

Wuhan, China, for his

unconditional support

extended as PhD research

supervisor. Further, the author

is grateful to the Editors (Eweje,

Gabriel and Foley, Maggie) and

to the two anonymous referees

for their insightful comments

and suggestions on the paper.

PAGE1042 jCORPORATE GOVERNANCE jVOL. 18 NO. 6 2018, pp. 1042-1056, ©Emerald Publishing Limited, ISSN 1472-0701 DOI10.1108/CG-10-2017-0252