Do Corporate Governance Frameworks Affect Sustainability Reporting?

Abstract

Corporate governance plays a pivotal role in shaping sustainability reporting, yet the intricate mechanisms behind this relationship remain underexplored. This study employs a meta-analytical approach, synthesizing data from 34 selected articles and over 60,000 observations to uncover how corporate governance structures influence ESG (environmental, social, and governance) disclosure practices. Our findings reveal statistically significant positive correlations between key governance attributes—such as board size and female representation—and both ESG disclosure and profitability. Interestingly, the presence of independent directors does not yield statistically significant effects. Leveraging a two-stage structural equation modeling (TSSEM) approach, we provide robust evidence that enhanced ESG disclosure is strongly linked to improved financial outcomes, reinforcing the vital interplay between sustainability reporting and corporate performance. Firms with robust governance frameworks tend to adopt more comprehensive ESG reporting practices, which can drive long-term profitability. These insights not only contribute to the empirical literature but also offer practical guidance for firms, regulators, and policymakers. Strengthening governance structures and integrating sustainability into corporate strategies can enhance transparency, accountability, and stakeholder trust. As sustainability expectations evolve, aligning governance and reporting strategies with industry standards and regulatory frameworks becomes increasingly essential for long-term success.