The influence of corporate governance on corporate sustainability: new evidence using panel data in the Iberian macroeconomic environment

• Pages: 785-806
• Date: 03 August 2020
• DOI: https://doi.org/10.1108/IJAIM-05-2020-0068
• Published date: 03 August 2020
• Author: Beatriz Lopes Cancela,Maria Elisabete Duarte Neves,Lúcia Lima Rodrigues,António Carlos Gomes Dias
• Subject Matter: Accounting & finance,Accounting/accountancy,Accounting methods/systems

The influence of corporate

governance on corporate

sustainability: new evidence using

panel data in the Iberian

macroeconomic environment

Beatriz Lopes Cancela

Coimbra Business School, Polytechnic Institute of Coimbra, Coimbra, Portugal

Maria Elisabete Duarte Neves

Coimbra Business School, Polytechnic Institute of Coimbra, Coimbra, Portugal and

Centre for Transdisciplinary Development Studies,

University of Tr

as-os-Montes and Alto Douro, Vila Real, Portugal

Lúcia Lima Rodrigues

School of Economics and Management, University of Minho, Braga, Portugal, and

Ant

onio Carlos Gomes Dias

Centre for Transdisciplinary Development Studies,

University of Tr

as-os-Montes and Alto Douro, Vila Real, Portugal

Abstract

Purpose –In the macroeconomic environment of the Iberian Peninsula, this paper aims to examine the

influence of corporate governance characteristics on corporate sustainability performance. The purpose of

this paper isto address corporate practices while determiningwhich corporate governance characteristicscan

improve corporate sustainability,considering, for this purpose, three dimensions of sustainability:economic,

environmentaland social.

Design/methodology/approach –This sample comprises 99 non-financial companies of the Iberian

Peninsula, during the 2013–2017period. The authors have used the panel data methodology, specificallythe

generalized method of moments (GMM) estimation method proposed by Arellano and Bover (1995) and

Blundelland Bond (1998) to test the hypotheses formulated.

Findings –The results obtained have shown that corporate sustainability performance is affected

differentlydepending on the sustainability dimension thatis considered.Specifically, the economic dimension

is determined by public debt, the board size, board diversity and the existence of an audit committee.

Regarding the environmental dimension,the board size and the presence of the audit committee, as well the

corporate social responsibilitycommittee, are the most important determinants. Finally,the social dimension

was influenced by the board size,audit committee and the control variable of capital structure, which means

that in this dimension, the sources of financing used by thecompany also help in determining its levels of

social concern.

Originality/value –To the best of the authors’knowledge, this is the first time that a study has been

carried out in the Iberian Peninsula on the corporate sustainability using GMM-system model for three

JEL classification –G38, C33, Q56

This work is supported by national funds, through the FCT –Portuguese Foundation for Science and

Technology under the project UIDB/04011/2020 and within the project UIDB/03182/2020.

Influence of

corporate

governance

785

Received19 May 2020

Revised7 July 2020

Accepted14 July 2020

InternationalJournal of

Accounting& Information

Management

Vol.28 No. 4, 2020

pp. 785-806

© Emerald Publishing Limited

1834-7649

DOI 10.1108/IJAIM-05-2020-0068

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

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

dimensions of sustainability.Corporate sustainability depends on externaland internal factors of companies.

Therefore,regulators and managers should realize thatthey will have to be more effective in their statements.

Keywords Corporate sustainability, Corporate governance, Panel data,

Firm-specific characteristics, Macroeconomic factors, Iberian Peninsula

Paper type Research paper

1. Introduction

The debate in the area of corporate sustainabilitystarted at the end of the 20th century. The

concept that aims to match the three dimensions of sustainability in the business context

(economy, environment and society) has emerged in 1998 by Elkington (1998) and Hussain

et al. (2018).

Companies that seek long-term sustainability are forced to create economic value

reducing several environmental and social problems associated with their daily activities.

Thus, the sustainability dimension must be included in the company’s vision (Bonn and

Fisher, 2011). Following previous data, the determinants that are capable of changing

companies regarding sustainability can be internal or external to organizations. However,

there is a lack of studies focusing on the three dimensions of sustainability, regarding

internal and external factors,which explain our interest to explore these variables.

Accordingly, the present study aims to understand how corporate governance

characteristics influence corporate sustainability performance in three dimensions

(economic, environmental and social) in the macroeconomic environment of the Iberian

Peninsula. In a global context of strong competitiveness, these two cross-border

countries have some similar business characteristics, such as a good global reputation

with new amounts of foreign capital in the face of a rapid economic recovery after the

global financial crisis and the sovereign debt crisis of the past decade. Likewise, at the

macro level, the GDP of both countries is growing above the European average, in

thesampleperiod.

Specifically, this research aims to analyze the determinants of the three dimensions of

corporate sustainability usinga sample of listed companies on the Portuguese and Spanish

stock markets, between 2013 and 2017. To test our hypotheses, we use the panel data

methodology. This methodology allows us to control and correct endogeneity, which can

arise from the casual relationship that the dependent variable may have with the

explanatory variables in our study. For this reason, the GMM model was estimated using

instruments, that is, we used all the variables on the right side of the model with t-1 lags for

the level equations, as suggested by Blundell and Bond (1998) when deriving the system

estimator used in thisarticle.

Specifically, our results point out that managers of Iberian companies are more

concerned with satisfyingtheir employees than with environmental issues. Thisis probably

because environmentalexpenditures are still difficult to quantify.

The rest of the study is organized as follows: Section 2 reviews the literature and

develops the research hypotheses; Section 3 describes the data, variables and

methodology; Section 4 presents and discusses the results; and Section 5 presents our

conclusions.

2. Literature and hypotheses

In this section, we first summarize the main determinants of corporate sustainability and,

then, based on the argumentspresented, we develop our hypotheses.

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