Research: The independence and experience of the audit committee chair significantly affect ESG disclosure, and governance reforms strengthen the effect.

Introduction

An empirical study of listed companies in Saudi Arabia finds that the independence and professional experience of the audit committee chair can significantly improve the quality of corporate ESG (environmental, social, and governance) disclosure, and that the corporate governance reform advanced in 2017 further strengthened this positive effect. The study provides new empirical evidence for understanding the interaction between corporate governance institutional changes and sustainable development practices in emerging markets.

Research Background

As investors, regulators, and the public increasingly expect companies to shoulder sustainable development responsibilities, ESG disclosure has become a key indicator of corporate transparency. As the core body within the corporate governance framework responsible for overseeing the integrity of financial and non-financial reporting, the audit committee chair's independence, professional background, and external directorships are regarded as important factors affecting disclosure quality. However, in emerging markets where governance frameworks are still evolving, there remains a lack of systematic empirical evidence on how audit committee chair characteristics specifically affect ESG disclosure and whether institutional reforms can shape this relationship.

Research Design and Data

To fill this research gap, the researchers selected Saudi Arabia as the research subject, using 243 firm-year observations of listed companies from 2014 to 2023. They employed fixed-effects regression models to examine the effects of audit committee chair independence, professional experience, and multiple board directorships on ESG disclosure quality. At the same time, they focused on testing the moderating role of Saudi Arabia's 2017 corporate governance reform (affiliated with the national transformation plan "Vision 2030") in the above relationships.

Key Findings

The results show that independent audit committee chairs with professional experience are significantly associated with higher ESG disclosure quality; conversely, the more directorships the chair holds in other companies, the poorer the ESG disclosure transparency. More importantly, the 2017 corporate governance reform significantly strengthened the positive effect of independent and experienced chairs on ESG disclosure while weakening the negative effect of multiple directorships. This indicates that regulatory reform can optimize the positive role of audit committee leadership in sustainable information disclosure.

Research Implications

This study offers practical insights for corporate boards, investors, and policymakers in emerging markets. The research points out that selecting an independent and professionally competent audit committee chair is an effective mechanism for improving ESG transparency; continuous corporate governance reforms, such as the regulatory upgrade under Saudi Arabia's "Vision 2030," not only help attract international investors but also promote the alignment of corporate sustainable strategies with global standards. Better-quality ESG disclosure helps strengthen corporate accountability, enhance stakeholder trust, and contribute positively to achieving the United Nations Sustainable Development Goals.

Research Source and PublicationAccording to the paper's authors, this study is the first empirical research to systematically examine the relationship between audit committee chair characteristics and ESG disclosures in Saudi Arabia, incorporating the moderating role of corporate governance reforms. The paper has been published in the open-access journal Humanities and Social Sciences Communications under Springer Nature, titled "The moderating effect of corporate governance reforms on the relationship between audit committee chair attributes and ESG disclosures."