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1. Introduction
Managers consistently face the decision of how to allocate scarce corporate resources in an environment placing more and more emphasis on long-term business success (Waddock and Graves, 1997). Effective implementation of well-developed corporate governance requirements is a key factor in long-term business success. Poor corporate governance practices are found to be a main contributor to the 1997 Asian financial crisis, well-publicized US bankruptcies such as Enron and Worldcom and the 2008 financial crisis. These corporate failures added momentum to the call for stricter regulations, stronger corporate governance practices and more transparent disclosure of financial and non-financial information for stakeholders to have a more effective monitoring control for corporations, greater management accountability and better valuation of firms. Those bankruptcies were a catalyst for the spread of regulatory changes in corporate governance requirements worldwide (Woidtke and Yeh, 2013). Two of the core principles of corporate governance are the accountability of firms’ actions and conduct to shareholders, and transparency, in the form of disclosure of financial and non-financial information. Transparency allows owners to ensure that firms are well managed and to hold both boards and executives accountable.
Since the introduction of the Global Reporting Intuitive (GRI), sustainability reporting has become a serious research line focusing on non-financial disclosures. The GRI covers environmental, social and governance disclosure. Wilburn and Wilburn (2013) stated that sustainability performance indicators (environmental, social and governance) can help a firm create sustainability strategies and help stakeholders evaluate a firm’s sustainability performance (Leung and Gray, 2016; Rao and Tilt, 2016).
The GRI Sustainability Reporting Guidelines defines sustainability reporting as “a process that assists organizations in setting goals, measuring performance and managing change towards a sustainable global economy – one that combines long term profitability with social responsibility and environmental care” (Global Reporting Initiative, 2013, p. 85). Sustainability reporting communicates a firm’s economic, environmental, social and governance performance, reflecting positive and negative impacts on the firm’s performance (Gray et al., 1995; Mistry et al., 2014; Sharma and Kelly, 2014).
As the implementation of sustainability reporting and the adoption of corporate governance are still in their early stages in Gulf Cooperation Council (GCC) countries and emerging markets, when compared to developed countries, empirical investigations of the role of corporate governance in corporate social responsibility...