Ownership structure and sustainability reporting: emerging economies evidence

• Date: 02 August 2024
• Pages: 883-908
• DOI: https://doi.org/10.1108/IJAIM-09-2023-0228
• Published date: 02 August 2024
• Subject Matter: Accounting & finance,Accounting/accountancy,Accounting methods/systems
• Author: Yusuf Nuhu,Ashraful Alam

Ownership structure and

sustainability reporting: emerging

economies evidence

Yusuf Nuhu

Salford Business School, University of Salford, Manchester, UK and

Department of Accounting and Finance, Abubakar Tafawa Balewa University,

Bauchi, Nigeria, and

Ashraful Alam

Salford Business School, University of Salford, Manchester, UK

Abstract

Purpose –The purpose of this studyis to empirically examine the impact of ownership structure variableson

the level of sustainability reporting (SR)of listed BRICS energy f‌irms as well as the moderating role of the

board sustainabilitycommittee on this relationship.

Design/methodology/approach –This study used a sample of 1,260 f‌irm-year observations from BRICS

for the period 2010–2019.This study uses the Bloomberg database, companies’annual reportsand companies’

websites for data collectionand the ordinary least squares (OLS) and instrutemental variables (IV) two-stage

least squares(2SLS) regressions for data analysis.

Findings –This study provides empirical evidence that foreign ownership, managerial ownership and

blockholder ownership have a positiveand statistically signif‌icant impact on the level of SR. However, the

results indicateinstitutional ownership impacts SR negatively.The f‌indings remain qualitatively the same after

addressingendogeneity concerns using the IV 2SLS regression method.

Research limitations/implications –This paper has some limitations. This study focuses on listed companies

in BRICS. Therefore, future studies should look at non-listed small and medium enterprises. Similarly, because this

study focuses on emerging economies, future studies should consider comparative studies between developed and

developing economies.

Practical implications –This study makes signif‌icant empirical, theoretical and regulatory

contributions to policymakers, investors and management on the ownership type that positively

inf‌luence the level of SR.

Originality/value –This study contributes to the corporate governance and sustainability literature and

extends existing empirical literature on the role of ownership structure on the level of SR in the context

of emerging economies. This study provides important theoretical and empirical evidence for regulators

and policymakers.

Keywords Foreignownership, Managerialownership, Blockholderownership, Institutionalownership,

Neo-institutional theory, Emergingeconomies, Sustainabilityreporting

Paper type Research paper

The authors would like to sincerely acknowledge and appreciate the support and encouragement of

the Editor, Prof. Han Donker, and the two anonymous reviewers for their precious time in reviewing

our paper and providing valuable and insightful comments and feedback.

Funding: This research did not receive any specif‌ic grant from funding agencies in the public,

commercial, or not-for-prof‌it sectors.

International

Journal of

Accounting &

Information

Management

883

Received14 November 2023

Revised25 April 2024

Accepted12 July 2024

InternationalJournal of

Accounting& Information

Management

Vol.32 No. 5, 2024

pp. 883-908

© Emerald Publishing Limited

1834-7649

DOI 10.1108/IJAIM-09-2023-0228

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

As shareholders are among the major stakeholders in an organisation, ownership characteristics and

structures are among the important external governance mechanisms that inf‌luence the extent of

ESG/sustainability disclosure, as the motivations, preferences, objectives, time horizon and

principles of a company’s shareholders may affect the extent of sustainability reporting (SR; Hu

et al., 2018;Gillan et al., 2021;Ali et al., 2022;Flammer et al.,2021;Ilhan et al., 2023). Studies

such as Benlemlih et al. (2022),Flammer et al. (2021) and Desender and Epure (2021) noted that, as

important stakeholders in corporate organisations, equity holders are putting pressure on f‌irms to

incorporate environmental concerns into their strategies to maintain long- term prof‌itability and

value. While prior studies have examined the impact of different internal governance mechanisms

such as board size (Alshbili et al., 2020;Nuhu and Alam, 2023), board meetings (Liao et al., 2015)

and board gender diversity (Liao et al., 2015;Haque, 2017) on the extent of SR, the study of the

impact of governance variables such as ownership structure on sustainability disclosure has

remained scant, unexplored (Gillan et al., 2021;Flammer et al., 2021) and skewed towards western

developed economies such as USA, UK and European context (e.g. see Flammer et al., 2021;

Sarhan and Al-Najjar, 2022). Gillan et al. (2021) noted the disparities in the empirical evidence on

ownership characteristics and the ESG/SR link and called for more empirical work on the OS–SR

nexus to add to our understanding of the issue, especially in the context of emerging economies.

ESG/sustainability disclosure is non-f‌inancial reporting that is mostly voluntary (Flammer

et al., 2021). Suttipun (2021) def‌ined SR as “a voluntary reporting process by which information

relating corporate operation on environmental, social, and governance perspectives are made

available to stakeholders”.AsAksoy et al. (2020) argue, ESG/sustainability investment is a long-

term investment that requires time; thus, different categories of shareholders may have different

preferences for ESG/sustainability issues (Gillan et al., 2021). Extant literature suggests that

ownership structure is heterogeneous because of shareholders’diverse objectives and time

horizons (Ali et al.,2022;Flammer et al., 2021;Jain and Jamali, 2016).Whilesomeownersare

associated with a preference for short term f‌inancial gains, others are associated with long-term

f‌inancial and non-f‌inancial considerationsin making investment decisions. Velte (2022) noted that

traditionally, previous empirical evidence on governance structures examines the impact of

ownership structure on f‌inancial performance while neglecting non-f‌inancial performance.

However, evidence in the extant literature suggests that ownershipstructure is related to mandated

and voluntary non-f‌inancial reporting and disclosure such as environmental innovation (Shui

et al., 2022), corporate social responsibility (CSR) performance (McGuinness et al., 2017;Sarhan

and Al-Najjar, 2022), political spending disclosure (Ali et al., 2022), greenhouse gas emissions

(Benlemlih et al., 2022) and voluntary disclosure (Tsa ng et al., 2019).

Motivated by the growing interest in the literature on ESG/sustainability issues and the dearth

of empirical studies in the context of emerging economies, this study empirically examines the

link between ownership structure and SR in the context of emerging economy. The study used

regression analysis to examine the impact of variou s ownership variables on the extent of SR by

the sampled BRICS energy f‌irms. The f‌indings indicate that foreign ownership, managerial

ownership, and blockholder ownership have a positive and statistically signif‌icant impact on the

level of SR. However, the results indicate institutional ownership impacts SR negatively.

Similarly, the empirical f‌indings also conf‌irm the moderating role of the board sustainability

committee on the relationship between shareholding structure and the extent of SR. Overall, the

f‌indings provide empirical evidence of the signif‌icant inf‌luence of ownership structure variables

on the level of SR. Our study’s contributions to the literature are manifold. First, it contributes to

the corporate governance and sustainability literature and adds to the growing stream of literature

on the nexus between external corporate governance (CG) variables and SR. Zaman et al. (2022)

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