Important of Corporate Governance for Environmental Disclosure: Evidence from Pakistan Stock Exchange

Abstract

In modern times, it is crucial for industries that do not care about their environmental disclosure, and they can face problems in the success of the business because financial success is not a single determent of business success; in the modern era, governance demands society safety too. Therefore, this study investigates the impact of corporate governance variables related to board of directors and ownership structure on environmental disclosure. This study used the data of the top 30 indexing firms of the Pakistan stock exchange and the information gathered through content analysis from annual reports from 2016 to 2020. Moreover, penal data analysis was done through the statistical technique “Ordinary Least Square” (fixed and random model) to answer the study hypotheses by using Eviews v10. It was found that board structure has a positive and significant relation with environmental disclosure. In contrast, board independency relationship with the environment is negative and significant, whereas CEO duality, managerial and institutional ownership had an insignificant relationship, whereas foreign ownership relates to environmental disclosure positively and significantly. Theoretically, we used different theories, i.e., agency, legitimacy, and stakeholder theories, to link corporate governance to environmental disclosure decisions. Therefore, policymakers should consider ways to enhance board structure sketchily to provide more environmental disclosure activities. Implications for management include adopting a common environmental strategy. Additionally, this research inspires diverse stakeholders and activist groups to demand environmental disclosure aggressively.

Keywords: Corporate governance, Environmental disclosure, Penal data analysis, Pakistan stock exchange.