Corporate governance mechanisms and corporate sustinability performance: the moderating roles of ownership types and media coverage in Malaysian listed companies

Abstract

Sustainability performance has become an essential agenda in today’s corporate world owing to its wide-ranging impact on different stakeholders, which has increased demand and pressure for firms to embed sustainability in their business strategies. Capitalising on the mixed views of corporate sustainability performance (CSP), this study put together two perspectives, the internal and external drivers, in exploring determinants of CSP that have not been concurrently studied in the past. CSP is conditional on the ability and competency of the board of directors (BOD hereafter) and its sub-committees, such as the risk management committee (RMC), audit committee (AC) and sustainability committee (SC), ensuring that management embeds sustainability as part of the corporate strategy. A diverse BOD, RMC, AC and SC are linked to the decision-making that incorporates sustainability and caters for the interest of various stakeholders. However, past studies have not collectively examined all the attributes of BOD, RMC, AC and SC in one study. Additionally,the ownership types and media coverage may influence the relationship between corporate governance and CSP. Media coverage shape and influence public perception towards the firms and can affect their sustainability performance. Drawing on the stakeholder, agency and agenda-setting theory, this study intends to empirically investigate the effects of the board of directors, risk management committee, audit committee and sustainability committee on firm sustainability performance. This study also investigated the moderating role of ownership types and media coverage. The study sample comprised 254 publicly listed firms in Malaysia from 2020 to 2022, bringing 762 observations. Data from this study were secondary, extracted from annual reports, Refinitiv Eikon and news from The Edge. The content analysis approach was utilised to quantify the firm’s governance and corporate sustainability performance. Stata software was utilised as a data analysis tool. The results evidenced the positive relationship between corporate governance and corporate sustainability performance. This study also shows that family ownership positively moderates the relationship between corporate governance and corporate sustainability performance. However, government ownership does not moderate the relationship between corporate governance and corporate sustainability performance. Moreover, this study exhibits that media coverage strengthens the relationship between corporate governance and corporate sustainability performance. This study contributes to the existing literature by developing collective corporate governance mechanisms and investigates the role of media using agenda-setting theory, which has rarely studied in the past. The findings might assist regulators and policymakers in better understanding the impact of corporate governance on corporate sustainability performance. There were limitations in this study, such as a limited number of determinants that can be considered by future research to include other factors that may influence corporate sustainability performance.