Natoli, RiccardoAlhamami, Mahdi2023-09-172023-09-172023-07-14https://hdl.handle.net/20.500.14154/69190With the increasing preference for transparency in economic, environmental and social issues, sustainability reporting (SR) has become a broadly accepted practice for enterprises worldwide. Although SR is not a new concept, research focusing on the potential financial and non-financial benefits of SR is still limited, especially in the context of developing countries such as the Kingdom of Saudi Arabia (KSA). This research adopts a multi-theoretical perspective to examine how SR impacts corporate financial and non-financial performance. Since corporate governance (CG) is considered a potential method for improving SR transparency and efficacy, this research also investigates how specific CG mechanisms moderate this relationship. Although previous studies have examined SR and firm performance, they did not include a focus on Islamic items in SR. Additionally, the role of CG as a moderator in the relationship between SR and firm performance in the context of KSA remains unexplored. Therefore, the present research extends the literature by introducing a new framework through which to investigate CG mechanisms as moderating effects between SR and firm performance of KSA listed firms. This research adopted a quantitative approach and developed a modified global reporting initiative (GRI) disclosure index to collect secondary data through the manual content analysis technique from 121 listed firms. The present research also sourced the annual and sustainability reports for the data collection. The research’s variables included 1) the independent variables of total SR (TSR), economic SR (ECO), environmental SR (ENV) and social SR (SOC); 2) the dependent variable of financial performance, which is proxied by return on assets (ROA), return on equity (ROE) and Tobin’s Q (TQ), with non-financial performance being proxied by market share (MS) and internal business perspective (IBP); and 3) the moderating variable, which comprised the CG mechanisms of board size (BS), independent directors (ID), audit committee size (ACS), independence member of audit committee (IMAC), audit committee quality (ACQ), board gender diversity (BDG), government ownership (GOV) and foreign ownership (FOR). To test the research hypotheses, both univariate statistics (t-test) and fixed effect panel regression analysis were performed for two-panel datasets: 1) pre-COVID-19 (2015–2019, 596 firm–year observations and 2) including COVID-19 (2015–2020, 690 firm–year ii observations). Robustness testing was performed by employing the generalised method of moments (GMM) on the balanced panel data. The findings indicated that in KSA, the modified GRI index is more effective than the traditional GRI index. The research also found that SR and its three components (ECO, ENV, SOC) significantly and positively impact the financial performance indicators in the periods before COVID-19 and including COVID-19. Similarly, SR and its components demonstrated a positive significant relationship with non-financial performance in both data periods (pre and including COVID-19). Further, the findings associated with the moderating variables demonstrated that the CG mechanisms mostly did not moderate the nexus between SR and financial performance. Notably, GOV and ACQ demonstrated a significant moderating impact between SR and financial performance (ROA, ROE, TQ). The results further revealed that BS, ACS and GOV significantly affected SR and MS before COVID-19, while ID and BGD performed a similar role in the period including COVID-19. Similarly, the moderating variables BS and BGD were identified as significant moderators of SR on IBP both pre and including COVID-19. The results from this research offer insights for policymakers, practitioners and key stakeholders in KSA to achieve higher sustainability ratings and subsequently improve the financial and non-financial performance of listed firms. It also illuminates the moderating role of CG on the nexus of SR and firm performance. Practical and policy implications arising from this study include 1) strengthening the role of the board of directors; 2) highlighting the benefits of SR for profitability in KSA companies; 3) implementing comprehensive SR guidance and compliance for KSA listed firms; and 4) increasing the number of IDs, improving ACQ and encouraging the adoption of the International Financial Reporting Standards for effective SR.349ensustainability reportingCorporate governanceFirm performanceKSASaudi listed firmsThesis