The Impact of Governance Mechanisms on Social and Environmental Disclosure in Basic Materials Companies Listed on the Saudi Stock Exchange

Abstract

This study aimed to demonstrate the impact of corporate governance mechanisms on enhancing social and environmental responsibility disclosure in basic materials companies listed on the Saudi Stock Exchange, in light of the Kingdom’s rapid economic and regulatory transformations and in line with the transparency and sustainability requirements of Vision 2030.
The study relied on manually collected data from the annual reports of 41 basic materials companies during the period 2019–2022, which was then analyzed using panel data models. The results revealed that governance mechanisms do not have the same impact on the social and environmental dimensions.
Regarding social responsibility, the size of the audit committee was found to be the only statistically significant factor with a negative impact. In other words, the larger the committee, the more complex the coordination became, and the greater the focus on financial aspects at the expense of social responsibility disclosure. The board independence, separation of roles, meetings, and diversity of expertise, did not show a significant impact. Conversely, the environmental dimension revealed that the independence of board members was the most positive factor in promoting environmental disclosure, while the separation of the board chair and the CEO had a negative impact.
The board size, the audit committee size, and the frequency of its meetings did not show any significant impact. The study recommended strengthening board independence, improving the effectiveness of audit committees by reducing their size and increasing the competence of their members, and developing more rigorous and transparent disclosure policies.