The Impact of Board Characteristics on Level of Sustainability Disclosure: Evidence from Listed Companies of Sri Lanka

Abstract

The main objective of this study was to examine the impact of board characteristics and level of sustainability disclosure of all the companies (except banking, finance, insurance companies and investment trusts) listed in the Colombo Stock Exchange (CSE), Sri Lanka. Accordingly, 174 non-finance companies which represent sixteen sectors of CSE have been used as sample over four years (i.e., 2014 - 2017). Sustainability disclosure was measured based Global Reporting Initiative (GRI) framework, and was used as the dependent variable of the study, whereas board characteristics considered in the study included board size, board independence, board meeting frequency, CEO-Chair Duality, women on board, audit committee size, audit committee meeting frequency, independence of audit committee, CEO tenure, total skill-base of board of directors and existence of nomination committee, which were used as independent variables while also controlling for seven variables (i.e., firm size, firm age, institutional ownership, managerial ownership, foreign ownership, growth and industry type). Results obtained under ordered logistic regression indicated that board size (p<0.05) and size of audit committee (p<0.01) have a significant positive impact on the level of sustainability disclosures, whereas women on board displayed a significant negative impact (p<0.05) on such disclosures. The study contributes the extant literature by filling an empirical gap prevailed in the study area by encapsulating a wider sample, using a number of board characteristics and operationalizing sustainability disclosure on a comprehensive basis. The study is expected to have vital policy and managerial implications in reforming and strengthening corporate governance guidelines in achieving higher level of sustainability disclosure.