Board characteristics and sustainability

reporting. A case of listed firms in

East Africa
Peter Nderitu Githaiga and James Kibet Kosgei

Abstract Peter Nderitu Githaiga and

Purpose – This study aims to investigate the influence of board characteristics on sustainability reporting James Kibet Kosgei are
among listed firms in East Africa. both based at the
Design/methodology/approach – The study uses a sample of 79 listed firms drawn from East African Department of Accounting
securities exchanges and data from 2011 to 2020. Sustainability reporting is measured using Global and Finance, Moi
Reporting Initiative, and the data is analyzed by using three-panel data estimation models – fixed effect, University, Eldoret, Kenya.
random effect and the generalized method of moments.
Findings – The results reveal that board gender diversity, board financial expertise and board
independence are positively and significantly associated with sustainability reporting. Conversely, board
size has a negative and significant effect on sustainability reporting.
Practical implications – The findings from the study provide valuable insights to firm owners and
policymakers. The study highlights the importance of directors with financial knowledge, a high
proportion of non-executive directors and women representation in board and smaller boards as a
strategy that will help firms improve sustainability practices and reporting in East Africa.
Social implications – Results of this study underscore the effect of corporate governance (CG)
dimensions on social responsibility activities, such as philanthropy, emission reduction and waste
management initiatives as reported through sustainability responsibility.
Originality/value – This study adds to the growing literature on the relationship between CG attributes
and sustainability reporting from a developing economy perspective. Specifically, the study examines
how board gender diversity, size, independence and financial expertise affect sustainability reporting
adoption.
Keywords Sustainability reporting, Board characteristics, East Africa
Paper type Research paper

1. Introduction
The last three decades witnessed an unprecedented increase in voluntary disclosure of
non-financial information such as environmental, social or sustainability reporting by private
and public companies. The rationale of voluntary disclosure is to share corporate
information with the varied stakeholders more frequently about their social and
environmental performance through print-based reporting or their websites (Mendes-Da-
JEL classification – M41, K32
Silva and Onusic, 2014). Voluntary disclosure also supplements information published
because of regulatory requirements. With the increased global calls for sustainable
Received 13 December 2021
development, voluntary disclosure of sustainability practices (sustainability reporting) is Revised 21 January 2022
receiving more attention by companies, regulators, professional bodies and researchers; 4 February 2022
9 March 2022
thus, a topical area in management accounting literature. Besides, previous studies argue 18 March 2022
28 March 2022
that firms engage in sustainability reporting to seek legitimacy and for strategic reasons 27 April 2022
(Islam and Deegan, 2008). Accepted 24 May 2022

DOI 10.1108/CG-12-2021-0449 © Emerald Publishing Limited, ISSN 1472-0701 j CORPORATE GOVERNANCE j

 Sustainability reporting (also referred to as environmental, triple bottom line corporate
responsibility reporting or non-financial reporting) entails disclosing and being accountable
to internal and external stakeholders for organizational performance toward sustainable
development (Amoako et al., 2017; Sasse-Werhahn, 2019). According to Global Reporting
Initiative, G.R.I (2021), sustainability reporting is defined as “an organization’s practice of
reporting publicly on its economic, environmental, and/or social impacts, and hence its
contributions – positive or negative – towards the goal of sustainable development.” In the
same vein, the World Business Council for Sustainable Development defined sustainability
reporting as “public reports by companies to provide internal and external stakeholders with
a picture of corporate position on activities on economic, environmental and social
dimensions” (Nelson and Grayson, 2017). Therefore, the purpose of sustainability reporting
is to provide accurate and credible accounts by companies to stakeholders on their
environmental and social activities regardless of the economic impact for the firm
Sustainability reporting is the most comprehensive and integrative corporate reporting and
voluntary reporting tool that focuses on increased corporate transparency of social and
environmental performance and sustainable development (Alonso-Almeida et al., 2015).
Sustainability reporting is an organization’s sustainability reporting that discloses nonfinancial
and financial information to stakeholders (Trireksani et al., 2018). Sustainability reporting aims
to provide stakeholders with a clear picture of company values, principles, governance and
management values (Dilling, 2010). Besides, Chouaibi and Affes (2021) emphasize that firms
with strong social and ethical commitment usually engage more in environmental disclosure.
Extant literature shows that sustainability reporting influences firm performance and value
(Buallay et al., 2020; Kuzey and Uyar, 2017). In addition, Rezaee and Tuo (2019) argue that
sustainability reporting improves earnings quality. Studies further suggest that sustainability
reporting lowers the cost of debt and equity capital (Shad et al., 2020). The literature has
also argued that sustainability disclosures reduce information asymmetries between a firm
and its stakeholders (Herda et al., 2012; Van Buskirk, 2012). Despite these benefits, some
firms, particularly in developing countries, are reluctant to embrace this practice. Though
prior studies indicate that firm-specific and board characteristics are critical drivers of
sustainability reporting, the findings are inconclusive (Dienes et al., 2016; Orazalin and
Mahmood, 2019; Bhatia and Tuli, 2017; Buallay and Al-Ajmi, 2019).
Board characteristics are vital in adopting sustainability reporting because the corporate
governance (CG) mechanisms are integral in financial reporting and disclosure (Mnif and
Borgi, 2020; Nursimloo et al., 2020). Agency theory (Jensen and Meckling, 1976) proposes
that the monitoring role of boards forces firms to disclose information to reduce agency cost
and information asymmetry voluntarily. Based on the agency theory’s proposition, many
studies have provided empirical evidence on the effect of board composition on voluntary
disclosures (Lim et al., 2007; Bueno et al., 2018; Donnelly and Mulcahy, 2008). In addition to
their monitoring role, the literature has argued that the board plays an essential role in firms’
strategy to gain, maintain and repair the firm’s legitimacy (Perrault and McHugh, 2015).
Cormier and Magnan (2015) further claim that the board seeks to legitimize the firm by
advocating for broader voluntary disclosures such as sustainability reporting. According to
legitimacy theory (Dowling and Pfeffer, 1975), a firm sustainability reporting purposes of
claiming legitimacy to external stakeholders by demonstrating the company’s adherence to
social norms and expectations. Gonzalez-Gonzalez and Ramı́rez (2016) contend that firms’
legitimacy is threatened if they fail to disclose social and environmental information.
Prior studies have also reported a positive relationship between board characteristics,
voluntary disclosure and integrated reporting quality (Vitolla et al., 2020; Ofoegbu et al.,
2018; Bektur and Arzova, 2020; Rouf and Hossan, 2020). Agency theory, the dominant
theoretical framework in CG literature, suggests that the monitoring role of boards influence
firms to disclose information to reduce agency cost and information asymmetry (Brown and
Hillegeist, 2007). Based on the above proposition, many studies have provided empirical

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evidence on the effect of board composition on voluntary disclosures (Lim et al., 2007;
Donnelly and Mulcahy, 2008; Bueno et al., 2018). However, only a few studies have
attempted to empirically determine the association between board characteristics and
sustainability reporting (Shamil et al., 2014; Al-Shaer and Zaman, 2016; Correa-Garcia
et al., 2020; Ong and Djajadikerta, 2018; Cicchiello et al., 2021).
Grounded on agency theory, resource dependency theory and legitimacy theory
propositions, this study investigates the association between board characteristics and
sustainability reporting, using a sample of 79 listed firms from East Africa and data from
2011 to 2020. East Africa is a developing economy, and extant literature shows little
information about sustainability practices among developing economies. The remainder of
this paper is organized as follows. Section 2 discusses the literature review and hypotheses
development. Section 3 discusses the research methodology. The research findings are
reviewed in Section 4. Section 5 highlights the conclusion and implications of the results.

2. Development of hypotheses
2.1 Board size and sustainability reporting
Board size refers to the total number of directors that serve on a corporate board. Larger
boards are often characterized by greater diversity in terms of experience, financial
expertise and capabilities to solve problems, improving firm reputation and image.
Extant literature on large board sizes suggests two contrasting views. One view argues for
larger boards and the other reasons for smaller boards. The first view argues that larger
boards face coordination problems and are inefficient, leading to weaker management
control and increased agency costs (Fama, 1980; Jensen and Meckling, 1976). The second
view is that large boards are diverse, represent diverse interests and leverage human and
social capital, which leads to balanced and quality board decisions (Hillman and Keim,
2001; Pfeffer and Salancik, 1978). Additionally, Kumar Garg (2008) argues that the chief
executive officer (CEO) can easily manipulate large boards compared to small boards. The
author concludes by observing that corporate boards should be large enough to
accommodate individuals with the required expertise and knowledge for the board to
efficiently perform its mandate and yet be small for meaningful deliberations. From the same
line of thought, large boards are diverse and may have individuals knowledgeable on
environmental and social issues, thus influencing the firm to engage in corporate social
responsibility (CSR)-related activities and disclose the same.
Previous studies have found a positive association between board size and sustainability
reporting – for instance, Masud et al. (2018) considered a sample of 88 firms drawn from
three South Asian Countries (Bangladesh, India and Pakistan) and panel data for 2009 to
2016. Similarly, Mudiyanselage (2018), who examined the role of directors in corporate
sustainability using a sample of 100 listed Sri Lankan companies over the years 2012 to
2016, reported that firms engaging in sustainability disclosure policy have larger boards.
Correa-Garcia et al. (2020) analyzed determinants of the quality of sustainability reporting in
non-financial business groups drawn from four Latin Americans from 2011 to 2015. The
authors found that larger boards positively and significantly affect sustainability reporting
quality (SRQ). Beji et al. (2021) analyzed the impact of board characteristics on corporate
social responsibility performance. The sample was drawn from all the Société des Bourses
Françaises 120 Index (SBF120) between 2003 and 2016. The study finding indicates that
large boards are positively associated with all areas of CSR performance. Khaireddine et al.
(2020) reported similar results and French listed firms; Al-Shaer and Zaman (2016)
considered a sample of companies listed in 2012 in the UK FTSE350. However, Halau and
Bin-Nashwan (2021) used a sample comprising all listed firms in the Nigerian Stock
Exchange (218). Data was the for the period 2015–2019 and the findings show a negative
and significant relationship between board size and sustainability reporting. In addition, a

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 study that used a sample of 366 large Asian and African companies that have adopted
sustainable development goals as reported by their sustainability reports published in 2017
found that board size has no significant effect on sustainability reporting. From the empirical
literature reviewed this study, therefore, the hypothesis is given as follows:
H1. There is a positive association between board size and sustainability reporting.

2.2 Board independence and sustainability reporting

Board independence is essential in ensuring the board’s effectiveness through monitoring
the agent and internal operations (Sandhu and Singh, 2019). Board independence is
attained by ensuring that the firm has enough independent non-executive directors in the
boardroom. However, recent studies show inconclusive results on board independence
and sustainability reporting. Vitolla et al. (2020), who studied 134 international firms,
reported a positive association between board independence and integrated reporting
quality.
Masud et al. (2018) examined the impact of CG on environmental sustainability reporting
among three South Asian countries, namely, Bangladesh, India and Pakistan. The authors
used a sample of 88 listed firms for 2009–2016. The findings of this study show that board
independence has a significantly positive effect on environmental sustainability reporting.
Mudiyanselage (2018) reported similar results among Sri Lankan-listed firms. Ong and
Djajadikerta (2018) empirically evaluated the impact of CG attributes on sustainability
reporting among the Australian resource industries. The sample comprised 133 companies’
annual reports and stand-alone sustainability reports for the year ending June 30, 2012. The
study found a positive association between the proportion of independent directors and the
level of economic, environmental and social disclosures. Similarly, Khaireddine et al. (2020),
who used a sample of 82 companies listed SBF 120 index (French stock exchange
companies) and data for the period 2012 and 2017, reported that board independence has
a positive and significant effect on firms’ disclosure on governance, environmental and
ethics.
Conversely, Gul and Leung (2004) studied the association between board leadership
structure proportion of expert outside directors and voluntary corporate disclosures using a
sample of 385 Hong Kong companies report a negative relationship between board
independence(proportion of outside directors) voluntary disclosure practices. While,
Janggu et al. (2014) who assessed the effect of good CG on the sustainability disclosure
among 100 public listed companies in Malaysia and used the structural equation modelling
technique of partial least squares found no significant relationship between board
independence and sustainability reporting. Based on the above arguments and empirical
evidence, the following hypothesis is proposed:
H2. There is a positive association between board independence and sustainability
reporting.

2.3 Board gender diversity and sustainability reporting

Board gender diversity is a current topic in CG research, policymakers, researchers and
practitioners. Literature shows that a diverse board is more effective and has a broader
understanding of modern firms’ complexities (Hillman et al., 2000). Mori (2014) further
argues that directors’ characteristics, such as age and level of education, are key
determinants of boards’ performance, therefore likely to influence organizational outcomes.
Drawing on resource dependency theory (Pfeffer and Salancik, 1978), which views an
organization’s open system as reliant on resources from the external environment, board
gender diversity provides resources that support management, particularly on unfamiliar
matters (Hillman et al., 2009). In this light, gender diversity is a strategic asset that links the

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internal and external environment and, therefore, a source of competitive advantage and a
performance driver. Recent studies suggest that gender-balanced boards guarantee
effectiveness in decision-making. (Handschumacher and Ceschinski, 2020; Wahid, 2019;
Birindelli et al., 2020). Board diversity entails the heterogeneity of board members based on
different dimensions that are to the advantage of the firms. In the same vein, recent studies
also show a positive relationship between board diversity and firm performance (Calabrese
and Manello, 2021; Noguera, 2020; Mazzotta and Ferraro, 2020).
One of the mechanisms through which board gender diversity improves governance quality
is by ensuring the integrity of financial reporting. A study by Wahid (2019) found that firms
with gender-diverse boards are less likely to engage in financial reporting mistakes and
engage in less fraud. Studies have also reported that companies with a higher percentage
of female board members are less likely to engage in earnings management (Kyaw et al.,
2015). Sustainability reporting is an essential practice in financial reporting. Companies
engage in sustainability reporting as a tool for stakeholders engaging and validating a firm’s
corporate ethical behaviours (Herremans et al., 2016). According to Ntim and Soobaroyen
(2013), a diverse board can promote a firm legitimacy, as it can approach a wider
stakeholder group and strengthen relations between the firm and stakeholders. In the same
line of research Fernandez and Thams (2019) provide evidence that increased women
participation in boards is likely to enhance stakeholder management, as female directors
tend to shape a firm’s approach toward the community and philanthropy. Recent studies
reveal that women’s greater participation increases a firm’s probability of adopting
integrated reporting (Vitolla et al., 2020). Though there are increased calls for firms to
engage in sustainability reporting and women’s representation in corporate boards, just a
few studies have examined the association between the variables.
Fernandez-Feijoo et al. (2014) assessed the relationship between women in board and
sustainability reporting. The authors considered data for 22 countries that was extracted
from the Global Gender Gap Report, the Women on Board’s Report 2011 and Klynveld Peat
Marwick Goerdeler International Survey of Corporate Social Responsibility Reporting 2008.
The findings of this study reveal that countries with at least three had a high level of
sustainability reporting. A study by Araissi et al. (2016) assessed the effect of gender-
diverse boards on sustainability reporting. It used data of all listed in the Financial Times
Stock Exchange 350 index between 2007 and 2012. The authors found that the presence of
women directors on corporate boards increased firms’ involvement in social activities and
reporting the same. Buallay et al. (2020) analyzed the relationship between board gender
diversity and sustainability reporting. The authors considered a sample consisting of 2,116
stock-exchange-listed banks and data for 2007–2016. The findings indicate that when
female board members account for 22%–50% of the board, there was a significantly
positive association between board gender diversity and the level of ESG disclosure.
However, Shamil et al. (2014), who considered a sample of 148 listed companies and
annual reported reports for 2012, found a negative association between female board
members and sustainability reporting. However, Amran et al. (2014) studied the role of the
board of directors in SRQ and used a sample of 113 companies from 12 countries in the
Asia-Pacific region, found no relationship between board gender diversity and sustainability
reporting. Khan (2010) reported similar findings among Bangladeshi commercial banks.
Based on the above theoretical and empirical arguments, we hypothesize that:
H3. There is a positive association between board gender diversity and sustainability
reporting

2.4 Board financial expertise and sustainability reporting

Prior studies conceptualize board financial expertise as the proportion of board members with
educational and work experience in the financial and accounting fields (Al-Matari, 2020;

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 Aladwey et al., 2021). Generally, board financial expertise is the proportion of board members
with either an academic or professional background in accounting, auditing or auditing.
Financial expertise enhances the board’s ability to understand and interpret financial reports
and frame vital financial decisions of the firm.
Borrowing from the resource dependence theory, the boards provide two forms of capital to
the firm:-human capital and enhancing an organization’s ability to attain and maintain
resources (Naheed et al., 2021). Therefore, the board of directors’ mix of skills, experiences
and professional qualification significantly affect the firms’ strategic decisions and
performance. According to Ahmad et al. (2018), directors with a finance background have a
better understanding of the importance of social and environmental matters because of
their training on social accounting. Therefore, directors with financial expertise value society
and the environment and are more likely to encourage the firm to engage in sustainability
reporting. Furthermore, a study by Ahmad et al. (2018) that studied the relationship
between board attributes and CSR reporting and used a sample of 450 study companies
listed on the Main Market of Bursa Malaysia and annual data for 2008 to 2013 reported a
significantly positive association between directors financial background and CSR
reporting. Al-Qahtani and Elgharbawy (2020) investigated the association between board
diversity and voluntary disclosure and management of greenhouse gas information. The
authors used 165 of the FTSE 350 firms, including 99 firms from less carbon-intensive
sectors (i.e. information technology, telecommunication, consumer staples and consumer
discretionary, health care and financial) and 66 firms from the carbon-intensive sectors. The
findings of this study show that firms with a high proportion of directors with a financial and
industrial background were unlikely to disclose greenhouse gas information voluntarily. Erin
and Adegboye (2021), who used a sample of 100 firms listed on the Johannesburg Stock
Exchange and data for 2010–2018, report a significantly positive relationship between
board financial expertise integrated reporting quality:
H4. There is a positive association between board financial expertise and sustainability
reporting.

3. Methodology
3.1 Sample and data
The study considers all listed firms in East Africa from 2011 to 2019. The study period was
ideal for several reasons. First, the Rwanda Stock Exchange (RSE) was launched in 2011.
Second, the Nairobi Stock Exchange Limited changed to Nairobi Securities Exchange Limited
in 2010 to support trading, clearing and settling of all types of securities, specifically allowing
the listing of debt instruments. Third, the Uganda Securities Exchange (USE) embraced the
Settlement and Clearing Depository electronic trading system in 2010. In 2019, the East Africa
region had 122 listed firms that were distributed as follow; RSE Ltd with 10, Nairobi Securities
Exchange (NSE) with 67, 17 firms listed in the USE and 28 listed in the Dar es Salaam Stock
Exchange. The sample was selected using inclusion and exclusion criteria; the firm had
complete data for all the years under study. Cross-listed firms were only considered in their
parent country to avoid duplication. After applying the inclusion/exclusion criteria, the final
sample comprised of 79 listed firms yielding 790 firm-year observations. Data for this study
were collected using the content analysis method by scoring each firm’s sustainability
reporting disclosures in the audited annual reports, and stand-alone sustainability reports for
the study period were used.

3.2 Measurement of variables

The study uses several variables. The dependent variable sustainability reporting (SRI
score) is measured by using a composite index of three performance disclosure indicators
(economic, environmental and social), as suggested by Jamil et al. (2020). Economic

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performance disclosure (7 items), environmental performance disclosure (16 items) and
social performance disclosure (25 items). The sustainability reporting index (SRI) considers
quantitative and qualitative disclosure. The quantitative disclosure is measured by the
number of sentences of the disclosure. Qualitative disclosure are measured using a Likert
scale (Janggu et al., 2014) Likert scale for scoring purposes. The modified Janggu et al.’s
(2014) Likert scale is a five-point scale with 0 = no disclosure, 1 = general disclosure of 1–2
sentences, 2 = brief qualitative description of 3–5 sentences, 3 = detailed qualitative
explanations of more than 5 sentences, 4 = quantitative disclosure with a brief description
of 1–5 sentences, 5 = quantitative disclosure with a detailed explanation of more than 5
sentences (Jamil et al., 2020). The measurements for the rest of the study variables are
shown in Table 1.

3.3 Control variables

Following prior studies, this study incorporates several control variables. While prior studies
show that both large and small firms engage in sustainability reporting, the findings from
many of these show mixed results. Studies by Bhatia and Tuli (2017), Shamil et al. (2014);
Kansal et al. (2014) Rouf and Abdur (2011), Nursimloo et al. (2020) show a positive
association between firm size and sustainability reporting disclosure. On the contrary,
Amran et al. (2014) found no relationship between firm size and sustainability reporting
among 113 firms in the Asia-Pacific region. Using Corporate size and industry category are
found to correlate with the corporate social disclosures of the companies and the corporate
reputation as recognized through awards and social ratings has also been observed to be a
significant factor that influences the social disclosures made by the Indian companies
Firm size is measured as the logarithm of total assets (Hassan et al., 2020; Bhatia and Tuli,
2017). The empirical literature on the effect of profitability on social sustainability reporting
practices is unclear. At the same time, some researchers find a positive association
between firm profitability and sustainability reporting (Dienes et al., 2016; Orazalin and
Mahmood, 2019). Other researchers found no significant relationship between profitability
and sustainability reporting (Karaman et al., 2018). Yet, Bhatia and Tuli (2017), who
considered a sample of 158 Indian companies reported a negative relationship between
profitability and sustainability. Further, a few studies have asserted that there is a negative
relationship between CSR initiatives and disclosures and financial performance, on the
premise of the high cost of extensive charitable contributions, community development
plans, the maintenance of facilities in economically depressed locations and the
establishment of environmental protection procedures (Siregar and Bachtiar, 2010;
Rahman, 2011). Firm performance is measured as return on assets (ROA) which is the ratio
of net operating income divided by total assets (Bhatia and Tuli, 2017; Nazari et al., 2015).
Firm age may significantly determine the extent to which firms engage in sustainability
reporting. Older firms are likely to disclose sustainability information because they engage

Table 1 Measurement of variables

Variable Measurement

Independent Variables
Board Size (BS) The logarithm of the number of board members
Board Gender(BG) The proportion of female directors
Board Financial Expertise(BFE) The proportion of directors with accounting and finance knowledge
Board Independence (BI) The proportion of directors with accounting and finance knowledge
Control variables
Financial Performance (FP) Return on asset
Firm Size (FS) The logarithm of total assets
Firm Age (FA) The logarithm of the number of years since the firm was incorporated

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 more in social and environmental activities and have extensive experience in financial
reporting. However, prior studies on the relationship between firm age and sustainability
reporting show inconclusive findings (Liu and Anbumozhi, 2009; Mahmood and Orazalin,
2017). Firm age (measured as the ratio of the logarithm of the number of years since the firm
was incorporated) (Orazalin and Mahmood, 2019; Dienes et al., 2016).

3.4 Research models

This study empirically examines any possible relationship between the board of
characteristics and sustainability reporting among listed firms in East Africa. Accordingly,
the study uses multiple regression models to estimate the beta coefficients that are later
used to test the hypotheses. The research model is shown below:

SRit ¼ b 0 þ b 1 FAit þ b 2 FSit þ b 3 FPit þ b 4 BSit þ b 5 BIit þ b 6 BFEit þ b 7 BGit þ « it

SRit is the sustainability reporting, BSit is the board size, BIit is the board independence,
BFEit is the board financial expertise, BGit is the board gender, FAit is the firm age, FSit is the
firm size, FPit is the firm performance, « it = error term, b 0 is the intercept, b 1, . . .. . .. b n are
the beta-coefficients, “i” is the cross-section units and “t” is the period (2011 to 2020)

4. Findings and discussions

4.1 Descriptive statistics
Table 2 shows descriptive statistics. The SRI mean is 0.333, implying a relatively low level of
sustainability reporting among listed firms in East Africa. However, the standard deviation of
0.204 shows a high discrepancy in sustainability reporting, supported by the minimum
value of 0.021 and the maximum value of 0.838. Board size has a mean of 0.933 and a
standard deviation of 0.143. The mean board gender diversity is 0.173 and a standard
deviation of 0.123, implying low female representation in boards and high variability of
female directors among the selected firms. The mean value for board financial expertise is
0.666 and the standard deviation is 0.179. On average, most directors are knowledgeable
in finance, banking and accounting. The mean board independence is 0.767 and its
standard deviation is 0.173; therefore, East Africa’s boards of listed firms can be
considered independent. Firm size has a mean value of 7.267 and its standard deviation is
0.601. Firm age has a mean value of 1.736 and its standard deviation is 0.245

4.2 Correlation analysis

Table 3 shows the pairwise correlation matrix of the research variables study. It shows that
board gender, financial expertise and board independence positively correlate with the SRI.

Table 2 Descriptive statistics

Variable Obs Mean SD Min Max

SRI 790 0.333 0.204 0.021 0.838

BS 790 0.933 0.143 0.477 1.255
BG 790 0.173 0.129 0.000 0.667
B 790 0.666 0.179 0.000 1.000
BI 790 0.767 0.173 0.000 1.286
FP 790 0.060 0.094 0.280 0.479
FS 790 7.267 0.601 5.895 8.444
FA 790 1.736 0.245 0.602 2.390
Notes: Sustainability Reporting; BS = board size; BGD = board gender diversity; BFE = board financial
expertise; BI = board independence, FS = firm size; FP = financial performance; FA = firm age

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 Table 3 Pairwise correlation analysis
SR BS BG BI B FA FS FP

SR 1.000
BS 0.213 1.000
BG 0.115 0.304 1.000
BI 0.218 0.210 0.061 1.000
BFE 0.089 0.175 0.253 0.119 1.000
FA 0.007 0.187 0.072 0.036 0.052 1.000
FS 0.160 0.080 0.070 0.080 0.075 0.058 1.000
FP 0.475 0.058 0.136 0.019 0.182 0.128 0.009 1.000
Notes: Sustainability Reporting; BS = board size; BGD = board gender diversity; BFE = board
financial expertise; BI = board independence, FS = firm size; FP = financial performance; FA = firm
age;  r < 0.05

On the contrary, the correlation between board size and sustainability reporting is negative.
Firm size and financial performance, as control variables, have a positive correlation with
return on assets, and no significant correlation exists between firm age sustainability
reporting

4.3 Regression analysis

Regression analysis. Table 4 shows regression results for three-panel data estimation
models; the generalized method of moments (GMM), the fixed effect (FE) and the random
effect (RE). However, the hypotheses are tested using the GMM because control resolves
the potential reverse causality (Ha et al., 2016). Similarly, GMM is not prone to the weakness
common to FE and RE models, resulting in biased results (Sheikh and Malik, 2021). The
results show that board size has a negative and significant effect on sustainability reporting;
consequently, H1 is rejected. Orazalin and Mahmood (2017) reported a positive
relationship among Kazakhstan’s oil, gas and mining companies. Board independence has
a positive and significant effect on sustainability reporting; this implies that H2 is accepted.
The findings are consistent with prior studies (Vitolla et al., 2020; Masud et al., 2018; Ong
and Djajadikerta, 2018; Khaireddine et al. (2020). However, some prior studies reported an
insignificant relationship (Shamil et al., 2014; Mahmood and Orazalin, 2017). The coefficient

Table 4 Regression results

Variables GMM FE RE VIF

BS 0.162 (0.066) 0.127 (0.051) 0.097 (0.047) 1.21

BG 0.163 (0.051) 0.093 (0.040) 0.130 (0.040) 1.17
BFE 0.158 (0.050) 0.084 (0.038) 0.103 (0.036) 1.10
BI 0.270 (0.061) 0.186 (0.049) 0.203 (0.047) 1.09
FP 0.730 (0.073) 0.677 (0.063) 0.713 (0.061) 1.08
FS 0.053 (0.014) 0.028 (0.010) 0.032 (0.009) 1.05
FA 0.048 (0.035) 0.019 (0.032) 0.023 (0.029) 1.01
_cons 0.264 (0.144) 0.213 (0.109) 0.246 (0.104) –
R2 0.2151 0.3280 –
F statistics 204.59 (0.000) 27.29 (0.000) –
Wald x 2 – – 227.27
Hausman test (RE vs FE) – 10.74 (0.000) –
Random effect is
not appropriate.
Notes: Dependent variable: Sustainability Reporting; BS = board size; BGD = board gender
diversity; BFE = board financial expertise; BI = board independence, FS = firm size; FP = financial
performance; FA = firm age; GMM = generalized method of moments FE = fixed effect; RE = random
effect; standard errors in parentheses;  r < 0.05

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 of boards with board gender diversity suggests a positive influence on sustainability
reporting; hence, H3 is accepted. These findings are similar to prior studies (Fernandez-
Feijoo et al., 2014; Araissi et al., 2016; Buallay et al., 2020). Conversely, Amran et al. (2014)
and Khan (2010) found no significant relationship. The findings show that the association
between board financial expertise and sustainability reporting is positive and significant;
therefore, H4 is accepted. Ahmad et al. (2018) reported similar findings; however, Al-
Qahtani and Elgharbawy (2020) found a negative relationship.
Regarding the control variables, the study found that firm age was negatively and
significantly related to sustainability reporting. The results agree with Shamil et al. (2014).
However, they contradict Correa-Garcia et al. (2020) and Khaireddine et al. (2020), who
reported a positive association. The results suggest that younger firms are more likely to use
sustainability reporting for competitive advantage. Firm performance has no significant
effect on sustainability reporting. Firm size has a positive and significant impact on
sustainability reporting. The results agree with those of earlier studies (Correa-Garcia et al.,
2020; Khaireddine et al., 2020). Further, the findings indicate that firm performance has no
significant effect on sustainability reporting. The results are consistent with those of
Khaireddine et al. (2020) and Fernando and Pandey (2012), but contradict Bayoud et al.
(2012) who found a positive association.

5. Conclusion
The present study investigates the effect of board characteristics on sustainability reporting
among listed firms in East Africa. The study used a sample of 79 firms listed in four
securities exchanges in East Africa from 2011 to 2020 that yielded 790 firm-year
observations. The findings show that board gender diversity, board independence and
board financial expertise are positively and significantly associated with sustainability
reporting. However, board size is negatively associated with sustainability reporting.
Therefore, the study recommends that listed firms in East Africa consider smaller boards,
increasing the number of independent directors and the number of women on the board
and the number of board members with finance, accounting and auditing knowledge
because these will improve sustainability reporting. The findings have policy, managerial
and theoretical implications. First, the findings inform shareholders on the attribute to
consider when selecting directors. The results highlight the importance of having both men
and women on boards, a high proportion of independent directors and a high ratio of board
members with finance backgrounds.
Similarly, the findings are helpful in policymaking. Specifically, the policymaker now
understands what constitutes an ideal board structure that balances the interests of the
various stakeholders. Thus, the regulator may consider mandatory requirements on the
number of board members, women participation in corporate boards and the minimum
educational and professional backgrounds of board members. In addition, regulatory
authorities should consider enacting laws on minimum disclosure of sustainability practices
among listed firms to help investors and the public appreciate sustainability. Finally, the
findings support both the agency and the resource dependency theory for theoretical
implication. On the one hand, the agency theory argues that large boards are ineffective in
monitoring, which has been confirmed by the negative association between board size and
sustainability reporting. The findings of this study further highlight how a firm’s internal
governance mechanism influences its involvement in social activities such environmental
protection and charity as disclosed through sustainability reporting.
On the other hand, the resource dependency theory supports a diverse and balanced
corporate board as a source of social capital to a firm. This study shows that women’s
representation in the board, having more independent and non-executive directors and
including board members with finance and accounting knowledge improve sustainability
reporting. Future research may expand other CG dimensions such as board member

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personal characteristics (age, education, marital status and ethnicity), board meetings
frequency, board capital and CEO duality. Similarly, future research could also investigate
how firm-specific factors such as ownership structure influence sustainability reporting.
Future studies may also consider comparing the sustainability reporting practices across
different regions, privately owned and public companies, to determine the impact of board
characteristics on sustainability reporting across geographical areas and other corporate
bodies.

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Corresponding author
Peter Nderitu Githaiga can be contacted at: nderitugithaiga@mu.ac.ke

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