Original Research

Voluntary social performance disclosure and firm profitability of South African listed firms: Examining the complementary role of board independence and managerial ownership

Frank Sampong, Na Song, Gilbert K. Amoako, Kingsley O. Boahene
South African Journal of Economic and Management Sciences | Vol 24, No 1 | a3346 | DOI: https://doi.org/10.4102/sajems.v24i1.3346 | © 2021 Frank Sampong, Na Song, Gilbert K. Amoako, Kingsley O. Boahene | This work is licensed under CC Attribution 4.0
Submitted: 09 August 2019 | Published: 11 January 2021

About the author(s)

Frank Sampong, School of Management and Economics, University of Electronic Science and Technology of China, Chengdu, China; and Office of the Dean of Students’ Affairs, Kumasi Technical University, Kumasi, Ghana
Na Song, School of Management and Economics, University of Electronic Science and Technology of China, Chengdu, China
Gilbert K. Amoako, Department of Accountancy and Accounting Information Systems, Business School, Kumasi Technical University, Kumasi, Ghana
Kingsley O. Boahene, School of Management and Economics, University of Electronic Science and Technology of China, Chengdu, China; and Department of Liberal Studies, Business School, Kumasi Technical University, Kumasi, Ghana


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Abstract

Background: There is growing literature promoting corporate governance mechanisms as important elements that could mitigate the inconclusive findings within the corporate social performance and firm profitability research. A key theoretical assumption within the extant literature that provides support for this proposition is that corporate social performance and firm profitability are organisational outcomes in the presence of good corporate governance.

Aim: Firstly, the aim is to re-investigate voluntary social performance disclosure (SPD) and long-term profitability association from the perspective of international standards, using the Global Reporting Initiative G3.1 guidelines. Secondly, to examine the joint moderating effect of board independence and managerial ownership (MO) on the voluntary SPD and profitability nexus.

Setting: The South Africa institutional setting, where recent corporate governance regimes require firms to voluntarily make corporate governance related disclosures on both shareholder-and stakeholder-related information is used as the study context.

Method: Utilising manually extracted data of listed firms, over the period 2010 to 2015, the generalised least square regression and seemingly unrelated regression (with a 1-year lag as the main independent variable) are used to examine the stated hypotheses.

Results: We found a positive association between voluntary SPD and long-term profitability. We also found that the presence of non-executive directors positively moderates the association between voluntary SPD and long-term profitability. Thirdly, the proportion of MO significantly positively moderates the association between voluntary SPD and long-term profitability. Lastly, the complementary role of the presence of non-executive directors and the proportion of MO significantly positively moderates the association between voluntary SPD and long-term profitability.

Conclusion: This study finds support for scholarly theoretical arguments that organisational outcomes are largely possible in the presence of good corporate governance, which has a long-term implication for firms’ shareholder wealth maximisation. This study contributes to the ongoing research examining the notion of substitutive versus complementary effects of governance mechanisms, and a growing research literature on corporate social responsibility (CSR) disclosure from the perspective of international standardisation. This study therefore makes far-reaching contributions to the corporate governance and social responsibility literature in an African context.


Keywords

corporate governance; corporate social performance; complementary/substitutive framework; global reporting initiative; emerging markets.

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