Corporate Governance and Corporate Reputation: The Role of Environmental and Social Reporting Quality

Mohamad Iruwan Ghuslan,Romlah Jaffar,Norman Mohd Saleh,Mohd Hasimi Yaacob

doi:10.3390/su131810452

Mohamad Iruwan Ghuslan, Romlah Jaffar + Show 2 more

Open Access

https://doi.org/10.3390/su131810452

Copy DOI

Abstract

Corporate reputation is companies’ most valuable asset as it can position them to gain competitive advantages that lead to sustainable performance. Therefore, understanding the factors that influence corporate reputation is vital for a company’s survival. The study objectives were to investigate the effects of corporate governance and the quality of environmental and social reporting on corporate reputation. Additionally, this study examined the role of environmental and social reporting quality on the relationship between these two variables. This study used secondary data collected from multiple sources such as the Thomson Data Stream database and annual reports of publicly listed Malaysian companies between 2017 and 2018. The results showed that corporate governance effectiveness and environmental and social reporting quality positively influence corporate reputation. Additionally, the quality of environmental and social reporting mediates the relationship between corporate governance and corporate reputation. This study bridges research gaps by providing evidence for the impact of effective corporate governance, specifically board diversity, on corporate reputation in Malaysia. The findings can help companies to establish criteria and qualifications for the appointment of new board members. The members must have the right combination of skills, knowledge, experience and independent elements that enable them to make decisions to meet companies’ objectives.

Highlights

Corporate reputation is companies’ most valuable asset as it can position them to gain a better competitive advantage [1], leading to more sustainable performance [2,3]
The findings indicate that implementing effective corporate governance mechanisms and disclosing high quality environmental and social reporting reduces information uncertainty and increases stakeholders’ confidence, which eventually lead to better corporate reputation
This study developed a Corporate Reputation (CR) index based on five dimensions: commitment to stakeholders, financial performance, media exposure, brand value and awards; the maximum score was 7

Summary

Introduction

Corporate reputation is companies’ most valuable asset as it can position them to gain a better competitive advantage [1], leading to more sustainable performance [2,3]. It is unsurprising that studies on corporate reputation are receiving greater attention from scholars and practitioners [6,7]. In the field of economics, corporate reputation is considered a reflection of companies’ past actions, which indicate companies’ possible future financial performances to stakeholders [8]. Corporate reputation is viewed as a unique, intangible asset that is hard to imitate [9], representing the collective impression that multiple stakeholders have about a company [10]. This study conceptualised corporate reputation by referring to the Sustainability 2021, 13, 10452.

Objectives

Methods

Results

Conclusion