Unlocking the Sustainable Workplace Equality Policy (SWEP): Evidence from an Emerging Country

Abstract

Businesses are actively integrating sustainability principles into their operations by pursuing goals that go beyond reputation management, which all help companies capture value through growth and return on investment. This study aimed to investigate the current status of the Sustainable Workplace Equality Policy (SWEP) in an emerging country—Kuwait—and how it impacts firms’ financial and market performance. This study included companies listed in the Kuwait Boursa (Boursa Kuwait is the operator of the Kuwait Stock Exchange) in the period between 2016 and 2021. A disclosure index was prepared for SWEP based on guidelines provided by a combination of various sources and standards such as the Global Reporting Initiatives (GRI) Standard, S&P Global Corporate Sustainability Assessment, Dow Jones Sustainability Index, United Nations Global Compact, and KPMG Sustainability Reporting Standards. Time series regression analysis was used to examine the hypotheses of this study which were developed using Rawls’ Theory of Justice (1971). The results revealed a strong positive relationship between SWEP disclosure and firm measures of financial performance. The results also indicate that SWEP is value-relevant and affects firms’ market value, suggesting that investors consider firms’ disclosure of SWEP when making investment decisions in Kuwait. The results of the current study are of interest to several stakeholders, especially investors and policymakers. Specifically, this study is relevant to the Kuwaiti Government, which has defined a clear path for sustainable growth with the Vision 2035/New Kuwait initiative that is aimed at transforming the country into a financial and commercial hub for the region by 2035.

1. Introduction

It is true that in addition to public pressure and research on sustainability, businesses and organizations have also been criticized for their environmental management practices [1,2,3,4,5]. In the past two decades, a growing number of corporations, both within and outside the United States, have been involved in activities that promote positive social change [6,7,8,9]. A social movement is defined as “an organized effort by a significant number of people to change (or resist change in) some major aspects of society” [10], p. 489. As a result, they are often active outside of mainstream politics and involved in reshaping governance, as in civil rights (United States), antinuclear arms (Europe) [11], and social justice [12]. Generally, social justice refers to a system or structure in which inequalities (i.e., discrimination based on race, gender, class, religion, nationality, ethnicity, sexual orientation, or disability status) are not justifiable from the standpoint of the greater social good or are unfairly imposed [8]. According to the literature on corporate sustainability, organizational culture plays a crucial role in incorporating environmental considerations into entire organizations [13,14,15,16]. Scholars have found that supportive work environments foster environmentally oriented behavior in the workplace [17,18]. The sustainability of welfare, social protection, and living conditions in the workplace are crucial elements of a sustainable work environment [19,20,21]. Management must be effective within an increasingly diverse workforce to achieve or maintain a sustainable competitive advantage [22,23,24,25]. Most organizations have gender, ethnic, religious, and racial diversity [26,27]. Sustainability has become a priority for many companies, as consumers, shareholders, employees, and other stakeholders contribute to a normative context for greater sustainability awareness [28,29,30]. This raises questions about how sustainability strategies can be implemented in conjunction with mainstream competitive strategies [31,32].

A typical goal of organizational scholarship is to reconcile corporate social initiatives with seemingly inhospitable economic logic [32,33,34]. A number of business leaders and firms are responding to the call for enhanced corporate social responsibility (CSR) [32,35]. CSR humanizes companies in a way that other aspects of the job cannot; rather than being a profit-centered entity, it is seen as a contributor to society [36]. Furthermore, for a CSR strategy to be successful, it must be based on clear input–output perspectives; it must also cater to employee needs, encourage employee engagement, and be co-created with employees [36]. According to Bhattacharya [36], “CSR works most effectively when employees are the actual actors, with the company acting as an enabler” [36], p. 44. Often, organizations seek employee diversity to boost their human and social capital, as well as broaden the range of perspectives considered in decision making [37,38,39]; it appears that such benefits can be achieved when diverse employee groups are able to cooperate, share, and synthesize the knowledge they each bring to the workplace [40,41].

In response to climate change, lower carbon emissions, electrification, and new forms of employment, job shifts, career development, and workplace learning are becoming increasingly important. An unhealthy work environment, a lack of influence and co-determination, low job dignity and enjoyment, and weak or nonexistent employment relations are the bane of sustainable work. There are also inequalities, gender gaps, and discrimination against migrants on the negative side of the coin. It is not only social justice and respect that are needed to combat inequalities in the workplace; the pursuit of equality also has a productive purpose and is beneficial to economic growth and development.

The concept of CSR has been widely adopted by firms in developed countries for decades but has recently gained traction in emerging economies [42,43,44]. In this context, it is necessary to examine CSR, workplace equality, and nondiscrimination under Rawls’ Theory of Justice in an emerging economy. Accordingly, this study examined the current status of the Sustainable Workplace Equality Policy (SWEP) in Kuwait as an example of an emerging economy and how it impacts firms’ financial and market performance. The results demonstrated a strong positive relationship between SWEP disclosure and firm measures of financial performance. The results also indicated that SWEP is value-relevant and affects firms’ market value, suggesting that investors consider firms’ disclosure of SWEP when making investment decisions in Kuwait.

Using Rawls’ Theory of Justice, this study contributes to the existing literature by providing evidence that SWEP disclosure measured utilizing a disclosure index based on guidelines provided by a combination of various sources and standards is value-relevant and positively associated with measures of financial performance for firms listed in Kuwait as an example of an emerging economy that has not been examined before. The results are of interest to several stakeholders, especially investors and policymakers. Specifically, the study is relevant to the Kuwaiti Government, which has defined a clear path for sustainable growth with the Vision 2035/New Kuwait initiative that is aimed at transforming the country into a financial and commercial hub for the region by 2035.

The remainder of this article is organized as follows. Section 2 discusses the current status of the workplace equality policy in Kuwait. Section 3 presents the theoretical framework of the study. Section 4 presents the main findings of prior research and develops the research hypotheses. Section 5 explains the research design employed to empirically test the hypotheses. Section 6 reviews the descriptive statistics and empirical results, and Section 7 concludes the study.

2. Current Status of the Workplace Equality Policy in Kuwait

Kuwait, a small city-state on the Persian–Arabian Gulf, has undergone massive political, economic, and social development throughout the 20th century [45]. It has achieved one of the highest levels of per capita income in the world through the successful development of its oil resources since the 1940s [46]. With a crude oil production capacity of around 3 million barrels per day, Kuwait, along with Saudi Arabia and the UAE, has been part of the steady OPEC producers in recent years [46]. The Kuwaiti Government has defined a clear path for sustainable growth with the Vision 2035/New Kuwait initiative which is aimed at transforming the country into a financial and commercial hub for the region by 2035. The seven pillars of the Vision will be realized through the Third Kuwait National Development Plan (KNDP-3) 2020–2025 and subsequent national development plans [46].

Established in 2014, Boursa Kuwait is the operator of the Kuwait Stock Exchange, the national stock market of Kuwait. Since 2016, it has been responsible for driving engagement, growth, and innovation in the Kuwaiti capital market, while supporting the Capital Markets Authority, issuers, investors, and various other key stakeholders. Since its inception, Boursa Kuwait has played a pivotal role in the development of Kuwait’s capital market and the diversification of the national economy, in line with the goals of the Kuwait Vision 2035 initiative [47]. Keeping that view, the goals of Kuwait Vision 2035 include transforming Kuwait into a financial and trade center that is attractive to investors, where the private sector leads the economy, creating competition and promoting production efficiency under the umbrella of enabling government institutions, which accentuates values, safeguards social identity, and achieves human resource development as well as balanced development, providing adequate infrastructure and an inspiring business environment [47]. Therefore, a sustainable work environment in Kuwaiti companies is important to achieve the goals of Kuwait Vision 2035, providing a fertile environment to conduct this study in a setting that has not been examined before. Prior studies examined the effect of CSR (proxied by CSR disclosure indexes) on the financial performance and firm value for firms operating in the Gulf Cooperation Council (GCC), of which Kuwait is a member [48,49]. For example, Harun et al. [49] unpredictably found a significant negative relationship between CSR disclosure and firm value proxy in GCC Islamic banks, while Ghardallo and Alessa [48] reported that CSR disclosure (measured using the CSR composite index) is associated with the highest firm profitability threshold, suggesting that companies should invest more in the social aspects of CSR to enhance their profitability increase; however, to the best of the authors’ knowledge, no study was conducted examining the effect of the SWEP index that is developed from various sources and standards (as explained in Section 5) on measures of financial performance and firm value for firms operating in Kuwait

3. Theoretical Framework

A great deal of attention has been paid to Rawls’ Theory of Justice (1971) by scholars across many disciplines [12,50,51]. In this theory, freedom and equality are rationally accommodated [52,53]. In addition, the demand for justice is linked to a more general mode of reasoning by establishing a foundation based on the idea of fairness [54,55], see Figure 1. This theory of justice is remarkably effective, as it emphasizes fairness as a social good [56], and Rawls uses the principles of rationality, reasonableness, objectivity, and reflective equilibrium to justify his principles of justice [57,58]. There is evidence that attitudes of legitimacy and correctness are closely linked to the toleration of gender inequality [59,60]. The state should guarantee all its citizens freedom and liberty, human rights, the rule of law, participation, fairness, and justice [61], and in the same vein, the firm should guarantee equality of opportunity [62]. This means that no group should face discrimination (legal or de facto) based on their values [63]. In Rawls’ opinion, the organizational institution has the resources and opportunities to treat everyone fairly on the basis of their work competence within the institution rather than based on sociodemographic characteristics such as race, religion, and gender [56,64,65,66].

Rampa and Agogué [67] argues that because the organization has the opportunity to advance fairness and meritocracy in society, it has a greater ethical imperative to force these values [56,68,69,70]. It is the employees of a company who have the opportunity to advance the fairness principle in the workplace [71]. There is a growing trend among organizations to adopt policies that support employees [72,73]. Traditionally, employee creativity has been viewed as the microfoundation for firm innovation [74,75], which ultimately produces competitive advantages [75]. The componential theory of creativity emphasizes domain-relevant skills as a core driver of creativity [14,76]. This theory holds that “all humans with normal capacities can produce at least moderately creative work in some domain, some of the time—and that social environment (the workplace) can influence both the level and frequency of creative behavior” [77], p. 42. It has been shown that workplace equality practices within a given human resource system may create synergy and thus improve firm performance [78]. The importance of innovation for long-term corporate success cannot be overstated [77,79,80]. Businesses are not static, and the pace of change is accelerating rapidly; therefore, no company can continue to deliver the same products and services in the same way for an extended period of time [77,81,82].

Research has indicated that human capital may play a role in mediating the relationship between human resource diversity systems and employee outcomes [83,84]. Liu et al. [75] argued that employee outcome is determined by “creativity,” which is simply the production of novel, appropriate ideas within any area of human activity, such as science, art, business, education, and everyday life. Several researchers and theorists suggest that creativity and innovation are fostered when one is given a great deal of freedom to conduct his or her work [64,67]. According to the componential theory, innovation requires three elements—management practices, resources, and organizational motivation [85,86]—and individuals and teams generate innovation within an organization through their creativity [86,87]. This theory asserts that the work environment influences individual creativity [77,87,88]. Employers may also limit their available talent pool by discriminating against qualified applicants based on their sexual orientation [12,89]. Since diversity in the workplace is related to increased innovation, it can be concluded that there is a relationship between workforce diversity management and firm performance. Various stakeholders and employers have suggested that SWEP would bring about two specific benefits that would positively impact the corporate bottom line [90]: (1) the retention of talented employees and (2) the generation of new ideas and innovations by drawing on a workforce with a wide range of characteristics and experiences that accommodate CSR and firm performance (Figure 1). Therefore, the theoretical framework of this study is as follows (Figure 1):

4. Literature Review and Hypotheses Development

Researchers, employers, and policymakers worldwide have studied the impact of the globalization of markets on the demographic characteristics of workforces [91,92]. A diverse workforce consists of individuals belonging to different cultures, who have different characteristics, aspirations, and expectations [93,94]. Employees from different backgrounds have different needs, and all wish to be respected in their workplace and experience equality [95,96]. Management must understand the needs of these diverse groups of people to avoid employee tensions and conflicts [97,98,99]. Maintaining workplace harmony and/or an equality policy is important for increasing an organization’s productivity [12,100]. In this scenario, CSR measures are aimed at connecting the lines of action of organizations with desirable outcomes in societies [51,101,102,103]. CSR practices have the potential to enhance firm performance and, under certain conditions, even compensate for firm weaknesses, e.g., poor corporate ability [104]. CSR takes many forms among which corporate volunteering, employee fairness, nondiscrimination, environmental programs, and responsible investing are most commonly considered [34,105,106,107].

Most empirical studies on CSR focus on investigating factors that help to align CSR activities with company financial performance and pay particular attention to the interest of shareholders [108]. The findings are varied [101]. Another stream of research considers the impact of CSR on particular stakeholders like consumers and employees [107,109]. These studies explain the mechanism underlying CSR’s impact on company performance, highlighting potential conflicts of interest among company stakeholders [109].

The study of Hossain et al. [12] confirmed that Rawls’ Theory of Justice shows that firms with workplace diversity policies are likely to be more innovative and perform better than those without such policies based on the Corporate Equality Index published by the Human Rights Campaign Foundation in the USA. Porcena et al. [110] examined three manifestations of diversity management (diversity recruitment, diversity staffing, and valuing diversity) and their relationship with firm performance as mediated by internal and external ethics. Their findings indicate that the value of diversity management and its impact on corporate ethics contribute positively beyond their intended purpose and may encourage managers to continue to implement such efforts, which could lead to more diverse and ethical workplaces and increased firm performance [110]. Sharma [111] found a significant direct effect of corporate ethical values on both organizational citizenship behaviors and alienation from work; however, they found that perceived fairness does not moderate these relationships. According to the findings of their research, perceptions of fairness may suppress the impact of ethical transgressions on employee performance in the short term but have multiple implications in the long run [111]. Celma et al. [112] confirmed that a higher job quality generally increases employee well-being at work but that some practices are more effective than others for each well-being dimension. It is also noteworthy that some practices, such as job security and good environmental working conditions, positively affect all domains of employee well-being at work [113,114,115]. As a consequence of the procedural justice theory, Brooke [116] examined two approaches to diversity management in the workplace: (1) maximizing the benefits of diversity in the workplace and (2) minimizing the negative effects of diversity. In their study, they found that the procedural justice theory created conditions under which employees from all backgrounds felt comfortable contributing their unique perspectives, which maximized the benefits of diversity [116]. In addition, procedural justice practices, which champion fairness and respect, can act as a shield against conflicts that might stem from a diverse workforce [116].

Studies by Lee et al. [117] and Vijayakumar et al. [118] showed that a well-established CSR and workplace equality are positively associated with overall firm performance. Managing diversity and equality in the workplace is critical because there is a widespread public commitment to equality and diversity, which have been judged by different attitude surveys [119,120,121,122]. Managing diversity and equality is also important because it impacts all the members working in an organization, and if properly managed, an organization could potentially Improve productivity, opportunity, and competitiveness [38,123]. The value of workforce diversity in improving the quality of management’s decisions and providing innovative ideas and superior solutions to organizational problems is widely recognized [103,124]. Several empirical studies have shown that companies with effective diversity management are associated with improved bottom-line returns [125,126,127]. Sharing information and fostering constructive conflict management are the keys to proving the value of diversity [23,128,129]. Managing diversity is premised upon recognizing diversity and differences as positive attributes of an organization rather than as problems to be solved [50,130]. Similar results were reported by Ghardallou and Alessa [48], who found that CSR disclosure (measured using the CSR composite index) is associated with the highest firm profitability threshold for a sample of publicly listed GCC firms; however, this study did not examine SWEP as part of CSR disclosure. Indeed, one of Kuwait’s main messages is the commitment to all-inclusive, rights-based equal opportunity and the dignifying development of human capital and economic, social, and environmental sustainability. Based on the above discussions, the following hypothesis was developed:

H1: 

Sustainable Workplace Equity Policy (SWEP) disclosure is positively associated with firm performance.

In financial markets, a company’s valuation is determined by its future profitability [131,132]. After recent corporate scandals, disclosures by corporations (both mandatory financial reports and voluntary disclosures) have received significant attention [131,133]. By facilitating communication between management and the equity market, high-quality disclosures reduce valuation and managerial myopia due to information asymmetry and short-term market pressure [131,134,135]. In contrast, CSR refers to the economic, legal, ethical, and philanthropic responsibilities of companies [136]. Corporate bodies increasingly face stakeholder and external pressures to comply with sustainability norms; such pressures have perhaps intensified in the aftermath of the Global Financial Crisis [137,138]. Therefore, CSR constitutes a major area of disclosure and compliance for publicly listed entities; researchers have demonstrated that the overarching objective is to encourage both corporate growth and wider sustainability [139,140]. Under the umbrella of CSR concepts, the impact of SWEP disclosures on market value was evaluated in the current study.

Researchers have shown that the positive association between CSR and firm value is stronger when the cultural environment places a greater demand for CSR [141,142]. There are three primary areas covered here by firms: (1) compliance with environmental regulations, (2) worker and consumer rights, and (3) philanthropy and charitable work [143,144,145]. However, the literature on CSR recognizes the possible influence of social, economic, and political factors on the above issues, especially nonregulation. In contrast, employers are increasingly realizing how important human capital management is in knowledge-based and service-based economies [146,147,148] and how high standards of human capital management can enhance performance, particularly by enhancing employee skills base, motivation, and retention [118,148]. Moreover, practicing CSR helps organizations build sustainable business models [149,150]. Based on critical mass, human capital, and institutional theories, diversity and CSR policies are directly related [118,151,152]. CSR engagement can encompass various dimensions, with different levels of involvement in each dimension. Several studies have identified five major dimensions of CSR: diversity, employee relations, product, environment, and community [152,153,154,155,156]. In the real world, these dimensions are indicative of a company’s general stance on many social issues, such as the treatment of women, minorities, and employees; sustainable investment; environmental management; and community relations [100,152,157,158]. In reality, companies may prioritize different CSR activities by deciding which stakeholders’ expectations to satisfy, in what order, and to what extent [159,160]. A company may engage in multiple activities, such as promoting equality in the workplace, safety, quality in design, manufacture, sales, and after-sales services, and protecting the environment and local communities [152,161,162]. In this study, the aim of the index is to measure CSR “practices” in the term’s broadest sense, covering sustainability reporting, membership in CSR organizations and networks, certification practices, and different rankings of CSR performance along the triple bottom line. Managers can present CSR performance information using both quantitative/quantifiable and qualitative/nonquantifiable indicators [163,164]. Indeed, CSR reports contain credible information about CSR performance and are relevant for assessing firm performance [165,166,167,168]. CSR may directly impact firm value, but it also enhances customer satisfaction, reputation, and market perception, all of which have a positive impact on financial performance and firm value [169]. Based on the above discussions, the second hypothesis was developed:

H2: 

There is a positive association between Sustainable Workplace Equity Policy (SWEP) disclosure and a firm’s market value.

In the last half century, several studies explored how firm characteristics impact CSR disclosure levels [170,171,172,173]. Companies undertake CSR for various reasons [174,175], and many more create CSR policies and practices because they believe it will increase their bottom line [176,177].

The impact of CSR on existing key business metrics can be significant [178]. The concept and application of CSR, however, may differ depending on firm characteristics, such as size, age, corporate governance (CG), and financial characteristics [179]. The stakeholder theory suggests that the involvement of CSR increases with the age and size of a company [9,171,180]. Older firms are more responsible when it comes to diversity and environmental awareness [181,182]. It is necessary for young companies to build their image through CSR activities and achieve greater marginal returns from CSR activities. Generally, large companies are considered more socially responsible because they are more visible [36,90]. CG and CSR have mainly been studied and debated separately [46]. However, it has been hypothesized that there is a close connection between CG and CSR [183]. The literature on CSR emphasizes the need for the highest standards of internal governance, especially regarding internal CSR initiatives [184,185]. Based on CSR, companies with better governance tend to be more socially responsible [181,186], and the composition of a company’s board plays a significant role in determining its general performance [187] as well as its commitment to CSR [188,189]. Based on the above discussions, the following hypothesis was developed:

H3: 

Sustainable Workplace Equity Policy (SWEP) disclosure is positively associated with firm characteristics.

5. Research Design and Method

5.1. Sample Size

The present study examined the relationship between the SWEP index and firm characteristics and performance, using a sample of firms that were listed in the Kuwait Stock Exchange (Boursa Kuwait) in the period between 2016 and 2021. The Kuwait Stock Exchange (KSE) was chosen because the researchers identified that the Kuwaiti Government has defined a clear path for sustainable growth with the Vision 2035/New Kuwait initiative which is aimed at transforming the country into a financial and commercial hub for the region by the year 2035. A total of 168 companies were listed in the KSE under both the “main and premier market” on 31 December 2021. The “premier market” is the flagship of the Boursa Kuwait markets, targeting companies with high liquidity and a medium-to-big market capitalization. The “main market” comprises companies that do not qualify to be listed in the premier market but nonetheless enjoy enough liquidity to be listed among the most active market participants. Firstly, the top 50 Kuwaiti firms by total market capitalization as listed by the Kuwait Main Market 50 (BKM50) on 31 December 2021 were selected for the period between 2016 and 2021. The BKM 50 index consists of the Kuwait Stock Exchange’s 50 most liquid shares, weighted by market capitalization. These companies are likely to be the most attractive to foreign and local retail and institutional investors. Observations that do not disclose sustainability data and observations that do not have the necessary data to run the tests were excluded. The final sample consists of 25 firms over the period between 2016 and 2021 and 150 firm-year observations distributed among 5 industries: Basic Materials, Financial Services (including Banks), Industrial, Real Estate, and Telecommunications.

5.2. Measurement of SWEP Disclosure

To calculate SWEP, various sources from which to prepare a list of items to be incorporated in the annual reports and/or sustainability reports were chosen, including

i.

GRI Standards;

ii.

S&P Global Corporate Sustainability Assessment;

iii.

Dow Jones Sustainability Index;

iv.

UN Global Compact and the World Business Council for Sustainable Development;

v.

KPMG Sustainability Reporting Survey.

The sources above were selected as they collectively provide a comprehensive and international list of items to be incorporated in the annual and sustainability reports of companies. Accordingly, the SWEP index in this study was developed following international organizations’ guidelines that ensure workplace equality, nondiscrimination, and fairness. In addition, the requirements of the sources/reports/indexes selected to calculate SWEP in this study are relevant to the workplace equality and sustainability goals identified in the Kuwait Vision 2035 initiative that aim to raise CSR awareness among the KSE participants.

A research assistant was appointed for this purpose, and initially, 75 sets of information were included in the SWEP index. However, to reduce subjective judgment and after careful investigation by the authors, 64 items which are always reported/disclosed in annual reports or sustainable reporting by the sample companies were selected. Three dimensions—“Governance and Economic Dimension”, “Environmental Dimension”, and “Social Dimension”—were considered in the list. Appendix A contains the detailed list of information.

A dichotomous scoring system was developed, where if an item is disclosed, it scores one, and if it is not disclosed, it scores zero. As a result, each firm’s score was calculated using the formula below:

$$\mathrm{S}\mathrm{W}\mathrm{E}\mathrm{P}=\frac{1}{\mathrm{MAX}\mathrm{b}\mathrm{y}}\sum \mathrm{SCORE}\mathrm{i}\mathrm{b}\mathrm{y}$$

where SWEP index_by is the SWEP score for Firm b in the year y, MAX_by is the maximum possible score, i is each item in the TCFD index, and SCORE_iby is the score for item i, Firm b in the year y.

5.3. Regression Models

The objective of the current study was threefold. First, it examined the association between the SWEP index and firm characteristics (Equation (1)); then, it investigated the relationship between the SWEP index and firm financial (Equation (2)) and market (Equation (3)) performance. Hence, three OLS regression models were developed to test the study hypotheses as follows:

$${\mathrm{S}\mathrm{W}\mathrm{E}\mathrm{P}\mathrm{I}\mathrm{n}\mathrm{d}\mathrm{e}\mathrm{x}}_{\mathrm{i},\mathrm{t}}={\mathsf{\beta }}_0+{\mathsf{\beta }}_1{\mathrm{L}\mathrm{o}\mathrm{g}\mathrm{T}\mathrm{A}}_{\mathrm{i},\mathrm{t}}+{\mathsf{\beta }}_2{\mathrm{C}\mathrm{F}\mathrm{O}}_{\mathrm{i},\mathrm{t}}+{\mathsf{\beta }}_3{\mathrm{L}\mathrm{e}\mathrm{v}\mathrm{e}\mathrm{r}\mathrm{a}\mathrm{g}\mathrm{e}}_{\mathrm{i},\mathrm{t}}+{\mathsf{\beta }}_4{\mathrm{F}\mathrm{i}\mathrm{r}\mathrm{m}\mathrm{A}\mathrm{g}\mathrm{e}}_{\mathrm{i},\mathrm{t}}+{\mathsf{\beta }}_5{\mathrm{I}\mathrm{n}\mathrm{d}\mathrm{D}\mathrm{i}\mathrm{r}\mathrm{e}\mathrm{c}\mathrm{t}\mathrm{o}\mathrm{r}\mathrm{s}}_{\mathrm{i},\mathrm{t}}+\sum \mathrm{I}\mathrm{n}\mathrm{d}\mathrm{u}\mathrm{s}\mathrm{t}\mathrm{r}\mathrm{y}+{\mathsf{\epsilon }}_{\mathrm{i},\mathrm{t}}$$

(1)

$$\begin{array}{c}{\mathrm{R}\mathrm{O}\mathrm{A}}_{\mathrm{i},\mathrm{t}}={\mathsf{\beta }}_0+{\mathsf{\beta }}_1{\mathrm{S}\mathrm{W}\mathrm{E}\mathrm{P}\mathrm{I}\mathrm{n}\mathrm{d}\mathrm{e}\mathrm{x}}_{\mathrm{i},\mathrm{t}}+{\mathsf{\beta }}_2{\mathrm{L}\mathrm{o}\mathrm{g}\mathrm{T}\mathrm{A}}_{\mathrm{i},\mathrm{t}}+{\mathsf{\beta }}_3{\mathrm{C}\mathrm{F}\mathrm{O}}_{\mathrm{i},\mathrm{t}}+{\mathsf{\beta }}_4{\mathrm{L}\mathrm{e}\mathrm{v}\mathrm{e}\mathrm{r}\mathrm{a}\mathrm{g}\mathrm{e}}_{\mathrm{i},\mathrm{t}}+{\mathsf{\beta }}_5{\mathrm{F}\mathrm{i}\mathrm{r}\mathrm{m}\mathrm{A}\mathrm{g}\mathrm{e}}_{\mathrm{i},\mathrm{t}}+{\mathsf{\beta }}_6{\mathrm{I}\mathrm{n}\mathrm{d}\mathrm{D}\mathrm{i}\mathrm{r}\mathrm{e}\mathrm{c}\mathrm{t}\mathrm{o}\mathrm{r}\mathrm{s}}_{\mathrm{i},\mathrm{t}}\\ +\sum \mathrm{I}\mathrm{n}\mathrm{d}\mathrm{u}\mathrm{s}\mathrm{t}\mathrm{r}\mathrm{y}+{\mathsf{\epsilon }}_{\mathrm{i},\mathrm{t}}\end{array}$$

(2)

To perform value relevance analysis in the current study, the valuation model of Ohlson (1995) was adopted [62]; this model underpins a large body of value relevance studies that have been conducted over the last two decades in both developed and developing countries [190,191,192,193,194,195]. The Ohlson model is based upon three fundamental assumptions: (i) the value of equity is equal to the present value of expected future dividends; (ii) a clean surplus arises which means that all changes in assets and liabilities, except those relating to dividends, should pass through the income statement; and (iii) information changes in a linear fashion [196], p. 667. Ohlson’s (1995) model was extended by including other variables (Log TA, Firm Age, and Firm Industry) to ensure that the results obtained are not affected by any omitted variables. The linear regression equation of the Ohlson (1995) model yielded Equation (3):

$${\mathrm{L}\mathrm{o}\mathrm{g}\mathrm{P}\mathrm{r}\mathrm{i}\mathrm{c}\mathrm{e}}_{\mathrm{i},\mathrm{t}}={\mathsf{\beta }}_0+{\mathsf{\beta }}_1{\mathrm{S}\mathrm{W}\mathrm{E}\mathrm{P}\mathrm{I}\mathrm{n}\mathrm{d}\mathrm{e}\mathrm{x}}_{\mathrm{i},\mathrm{t}}+{\mathsf{\beta }}_2{\mathrm{B}\mathrm{V}\mathrm{P}\mathrm{S}}_{\mathrm{i},\mathrm{t}}+{\mathsf{\beta }}_3{\mathrm{L}\mathrm{o}\mathrm{g}\mathrm{T}\mathrm{A}}_{\mathrm{i},\mathrm{t}}+{\mathsf{\beta }}_4{\mathrm{L}\mathrm{o}\mathrm{g}\mathrm{T}\mathrm{A}}_{\mathrm{i},\mathrm{t}}+{\mathsf{\beta }}_5{\mathrm{F}\mathrm{i}\mathrm{r}\mathrm{m}\mathrm{A}\mathrm{g}\mathrm{e}}_{\mathrm{i},\mathrm{t}}++\sum \mathrm{I}\mathrm{n}\mathrm{d}\mathrm{u}\mathrm{s}\mathrm{t}\mathrm{r}\mathrm{y}+{\mathsf{\epsilon }}_{\mathrm{i},\mathrm{t}}$$

(3)

All variables employed in the regression models above are shown in

Table 1. Definition of variables.

Variables	Definition
SWEP Index	Sustainable Workplace Equality Policy
Log TA	Logarithm of total assets
Log Price	Logarithm of the closing share price at year end
EPS	Earnings per share
BVPS	Book value per share
CFO	Net operating cash flows/total assets
ROA	Net income of common capital/total assets
Leverage	Total liabilities/total assets
Firm Age	Firm age since establishment
Ind Directors	Independent members of the board of directors

Note: This table defines the variables examined.

.

5.4. Control Variables

As shown in Table 1, which defines the variables, the current study used a set of control variables that have been found to affect CSR performance in previous studies. Firm size (SIZE) was included since larger firms have greater visibility and face more intense stakeholder pressure to engage in CSR. SIZE_t is the natural logarithm of total assets at the end of year t. ROA_t was also included to control for the positive association between financial performance and CSR performance [32]. ROA_t is the return on assets, which is calculated as the net income divided by total assets at the end of year t. Financial leverage was controlled for because firms with constrained financial resources are less likely to engage in CSR [5]. In addition, firm age, cash flow from operations, and independent directors were employed as control variables as needed.

6. Findings and Analysis

6.1. Descriptive Statistics

Table 2. Descriptive statistics.

Variable	Obs	Mean	Std. Dev.	Min	Max
SWEP Index	150	0.656	0.035	0.6	0.75
Log TA	150	15.8	2.6	10.8	19.6
Log Price	150	4.5	0.7	3.3	5.6
EPS	150	6.5	5.5	−1.05	17.5
BVPS	150	16.5	36.2	0	126.2
CFO	150	0.03	0.045	−0.045	0.125
ROA	150	0.027	0.02	0.004	0.065
Leverage	150	0.6	0.28	0.075	0.92
Firm Age	150	37.5	16.6	2	69
Ind Directors	150	1.05	0.89	0	3

Note: This table reports the descriptive analysis of the variables examined.

gives valuable insights into the variables examined in the dataset by providing the descriptive statistics. The SWEP index ranged from 0.6 to 0.75, with a mean of approximately 0.65 and a standard deviation of 0.035. Likewise, Log TA, which is the logarithm of total assets, ranged from 10.8 to 19.6, with a mean of 15.8 and a standard deviation of 2.6. Furthermore, the logarithm of price had a standard deviation of 0.7 and a mean of 4.5, with a range of 3.3 to 5.6. Regarding earnings per share, a range of −1.05 to 17.5 was observed, with a mean of 6.5 and a standard deviation of 5.5. Book value per share ranged from 0 to 126.2, with a mean of 16.5 and a standard deviation of 36.2. CFO had a mean of 0.03 and a standard deviation of 0.045, while ROA ranged from 0.004 to 0.065, with a mean of 0.027 and a standard deviation of 0.02. For Leverage, a range of 0.075 to 0.92 was observed, with a mean of 0.6 and a standard deviation of 0.28. Firm Age ranged from 2 to 69, with a mean of approximately 37.5 and a standard deviation of 16.6. The Independent Directors variable had a mean of around 1.0, with a minimum of 0 and a maximum of 3 and a slightly high standard deviation of 0.89. Overall, Table 2 offers a detailed overview of the central tendency and variability of each variable, providing valuable insights into the datasets used in the current study.

6.2. Correlation Matrix

Table 3. Pairwise correlations.

Variables	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)
(1) SWEP_Index	1.000
(2) Log_TA	−0.357 ***	1.000
(3) Log_Price	−0.301 *	0.864 ***	1.000
(4) EPS	0.204 **	0.081	0.816 ***	1.000
(5) BVPS	−0.375 ***	0.286 ***	0.289	0.149 *	1.000
(6) CFO	−0.015	0.202 **	0.464 ***	0.403 ***	0.210 ***	1.000
(7) ROA	−0.245 ***	0.219 ***	0.277	0.596 ***	0.300 ***	0.456 ***	1.000
(8) Leverage	0.437 ***	−0.315 ***	0.287	−0.051	−0.394 ***	−0.241 ***	−0.621 ***	1.000
(9) Firm_Age	0.105	−0.099	0.688 ***	0.144 *	−0.005	−0.192 **	−0.199 **	0.235 ***	1.000
(10) Ind_Directors	−0.123	0.195 **	−0.218	−0.137 *	0.014	0.066	0.188 **	−0.382 ***	−0.156 *	1.000

Note: Significance Level: *** p < 0.01, ** p < 0.05, * p < 0.1. This table outlines the correlation matrix of the variables examined.

outlines the correlation matrix among the variables examined in the current study. The correlation coefficients ranged from −0.621 to 0.864, suggesting a wide range of relationships between the variables. For instance, a significantly positive relationship was observed between Log TA and Log Price, with a coefficient of 0.864, suggesting that companies with larger total assets tend to command higher market prices. Likewise, earnings per share (EPS) and book value per share (BVPS) showed a significantly positive association, with a coefficient of 0.816, implying that firms with a higher EPS typically have higher BVPS since earnings contribute significantly to book value. A notable positive correlation was observed between ROA and Leverage, with a coefficient of 0.621, indicating that firms with higher ROAs tend to be more leveraged. In contrast, Leverage showed a significantly negative correlation with the SWEP index, with a coefficient of −0.621, suggesting that companies with a higher SWEP index tend to be less leveraged. Table 3 also reports a significant negative association between Leverage and Ind Directors, with a coefficient of −0.382, suggesting that highly leveraged firms have fewer independent directors on their boards. Overall, Table 3 provides an insightful correlation analysis of all variables, unveiling a diverse set of associations between the examined variables.

6.3. Regression Analysis

Table 4. The relationship between SWEP and firm characteristics (Equation (1)).

SWEP Index	Coef.	St. Err.	t-Value	p-Value	[95% Conf	Interval]	Sig
Log_TA	0.001	0.001	0.94	0.349	−0.001	0.003
CFO	0.089	0.047	1.91	0.058	−0.003	0.182	*
Leverage	−0.027	0.011	−2.38	0.019	−0.049	−0.005	**
Firm_Age	0.015	0.001	3.17	0.002	0.002	0.001	***
Ind_Directors	0.012	0.002	4.82	0	0.007	0.016	***
Industry Control
Basic Materials	−0.073	0.01	−6.95	0	−0.093	−0.052	***
Financial Services	−0.071	0.007	−9.88	0	−0.085	−0.057	***
Industrial	−0.054	0.01	−5.52	0	−0.073	−0.035	***
Real Estate	−0.103	0.009	−11.46	0	−0.121	−0.085	***
Telecommunications	−0.023	0.011	−2.17	0.032	−0.045	−0.002	**
Constant	0.676	0.019	35.85	0	0.639	0.713	***
Adjusted R2		0.65		Number of observations		150
F-test		25.880		Prob > F		0.000

Note: Significance Level: *** p < 0.01, ** p < 0.05, * p < 0.1. This table reports the regressing SWEP on the firm characteristics.

provides the results of the analysis to examine the relationship between SWEP and firm performance variables. CFO shared a marginally significant positive relationship with SWEP, with a coefficient of 0.089 and a p-value of 0.058, suggesting that firms with higher CFO values disclose higher SWEP. This finding is consistent with prior sustainability research [179]. Similarly, and consistent with prior research [9,62,171,180,181,187], Firm_Age and Ind Directors exhibited a significant positive relationship with the SWEP index, with coefficients of 0.015 and 0.012 and p-values of less than 0.01, implying that older firms with a larger number of Ind Directors report higher SWEP values. In addition, and similar to prior studies [48,189], the Leverage control variable showed a significant negative relationship with the SWEP index, with a coefficient of −0.027 and p-value of 0.019, indicating that as leverage increases, SWEP reporting tends to decrease. Furthermore, the industry control variables revealed significant negative coefficients for Basic Materials, Financial Services, Industrial, Real Estate, and Telecommunications, indicating that firms in these industries tend to have lower SWEP index values. Moreover, a relatively high adjusted-R² of 0.65 was observed, suggesting that the model explain a significant portion of the variation in SWEP. Finally, the F-test was statistically significant, indicating that the model was a good fit for the data. Therefore, Hypothesis 1, which states that all firm performance variables examined in the current study are positively associated with SWEP, is accepted. The highest variance inflation factor (VIF) was less than 5 in Equation 1, providing evidence that multicollinearity is not a problem in this study.

The results of the regression analysis presented in

Table 5. The impact of SWEP on firm performance (Equation (2)).

ROA	Coef.	St.Err.	t-Value	p-Value	[95% Conf	Interval]	Sig
SWEP_Index	47.01	19.7	2.38	0.019	7.973	86.045	**
Log_TA	0.168	0.23	0.73	0.465	0.622	0.286
CFO	35.2	10.9	3.22	0.002	13.56	56.838	***
Leverage	−6.04	2.65	−2.28	0.024	−11.276	−0.807	**
Firm_Age	−0.066	0.031	−2.12	0.036	−0.127	−0.004	**
Ind_Directors	0.461	0.603	0.77	0.446	−0.731	1.653
Industry Control
Basic Materials	−1.11	2.8	−0.40	0.693	−6.66	4.45
Financial Services	1.267	2.16	0.59	0.559	−3.01	5.55
Industrials	3.384	2.5	1.35	0.178	−1.55	8.33
Real Estate	4.464	2.9	1.54	0.127	−1.28	10.2
Telecommunications	−1.143	2.53	−0.45	0.652	−6.15	3.86
Constant	−21.669	14.04	−1.54	0.125	−49.433	6.1
R-squared		0.31		Number of observations		150
F-test		5.6		Prob > F		0.000

NOTE: Significance Level: *** p < 0.01, ** p < 0.05. This table outlines the results of regressing SWEP on firm performance.

show the impact of the SWEP index on firm performance, as measured by ROA. The results indicate a statistically significant positive relationship between SWEP and ROA, suggesting that companies with higher SWEP indexes tend to have higher ROAs, which implies that the effective management of financial risk factors, as reflected by higher SWEP indexes, can lead to improved financial performance. In particular, Table 5 indicates a statistically positive relationship between the SWEP index and ROA, with a coefficient of 47.01 and a p-value of less than 0.05, suggesting that companies with better SWEP indexes generate higher returns on their investments. In addition, Table 5 indicates normal results between ROA (firm performance measure) and the set of control variables including CFO, Leverage, Firm Age, and Ind Directors, with statistically positive coefficients and p-values of less than 0.05. Additionally, the table reports an adjusted-R2 of 0.31, which indicates that the model explains a moderate portion of the variation in ROA. Table 5 concludes a significant F-test, indicating that the model is a good fit for the datasets. Accordingly, Hypothesis 2, which states that the ROA reports a significantly positive association with the SWEP index, is supported, suggesting that SWEP performance improves firm performance. The findings of the present study regarding the relationship between the SWEP index and the firm performance measures and firm characteristics are consistent with the extant literature [101,107,108,109,143,144,145,146,147,148,184,197]. The highest variance inflation factor (VIF) was less than 5 in Equation (2), providing evidence that multicollinearity is not a problem in this study.

Table 6. The impact of SWEP on firm value (Equation (6)).

Log_Price	Coef.	St.Err.	t-Value	p-Value	[95% Conf	Interval]	Sig
SWEP_Index	4.105	1.48	2.77	0.01	1.058	7.152	**
BVPS	−0.001	0.004	−0.15	0.886	−0.009	0.008
EPS	0.033	0.016	2.01	0.056	−0.001	0.066	*
Log_TA	0.276	0.048	5.78	0	0.178	0.375	***
Firm_Age	−0.053	0.023	−2.29	0.031	−0.101	−0.005	**
Industry Control
Basic Materials	−99.838	21.542	−4.63	0	−142.436	−57.24	***
Financial Services	−45.991	11.337	−4.06	0	−68.408	−23.573	***
Industrials	−53.255	16.808	−3.17	0.002	−86.491	−20.019	***
Real Estate	−29.157	17.836	−1.63	0.104	−64.426	6.112
Telecommunications	−49.003	22.367	−2.19	0.03	−93.233	−4.773	**
R-squared		0.924		Number of observations		150
F-test		43.321		Prob > F		0.000

Note: Significance Level: *** p < 0.01, ** p < 0.05, * p < 0.1. This table reports the results of testing the association between SWEP and firm value.

presents the results of the regression analysis of the effect of SWEP (Sustainable and Environmental Performance) on firm value as measured by the year-end closing stock price [141]. An analysis of Table 6 reveals a statistically positive relationship between SWEP and Log Price, with a coefficient of 4.105 and a p-value of 0.01, indicating a positive relationship between SWEP and firm value and suggesting that an increase in SWEP is associated with a higher firm value. In addition, Table 6 shows that EPS does have a positive relationship with firm value, as indicated by its coefficient of 0.033 and a p-value of 0.056. Also, the table reports an adjusted R-squared value of 0.924, suggesting that the regression model explains 92.4% of the variation in firm value. The F-test result (F = 43.321, p = 0.000) indicates that the overall regression model is statistically significant. Accordingly, Hypothesis 3, which states that firm value has a significantly positive relationship with SWEP, is accepted. This finding reaffirmed previous research findings [47,171,172,173,174,175,190,194]. The highest variance inflation factor (VIF) was less than 5 in Equation 2, providing evidence that multicollinearity is not a problem in this study.

To investigate the robustness of the analyses, the presence of endogeneity was examined using a Durbin and Wu–Hausman test. The results suggest that the SWEP index (Durbin = 0.026, p value = 0.87; Wu–Hausman = 0.024, p value = 0.87 and Durbin = 0.195, p value = 0.657; Wu–Hausman = 0.18, p value = 0.6745) in Equations 2 and 3, respectively, does not suffer from endogeneity bias.

7. Conclusions

In this study, CSR and workplace equality in the Gulf region, particularly in Kuwait, were examined. The concept of CSR has been widely adopted by firms in developed countries for decades but has recently gained traction in transition economies as well. The objectives of the Kuwait Vision 2035 initiative include taking actions that will lead to the transformation of Kuwait into a financial and trade center which is attractive to investors, where the private sector leads the economy, creating competition and promoting production efficiency under the umbrella of enabling government institutions, which accentuate values, safeguard social identity, and achieve human resource development as well as balanced development, providing advanced legislation and an inspiring business environment [47]. To achieve the Kuwait Vision 2035 initiative, Kuwait companies must maintain a sustainable work environment. In fact, Kuwait’s main message is its commitment to all-inclusive, rights-based equal opportunity and the dignified development of human capital, as well as to sustainable economic, social, and environmental development.

Prior studies examined the effect of CSR (proxied by CSR disclosure indexes) on the financial performance and firm value for firms operating in the Gulf Cooperation Council (GCC), of which Kuwait is a member [48,49]; however, to the best of the authors’ knowledge, no study has been conducted examining the effect of the SWEP index that is developed from various sources on the measures of financial performance and firm value for firms operating in Kuwait. This study is somehow fostering social justice under the umbrella of CSR with the help of a variety of corporate governance ingredients that assure a safe and healthy work environment.

In conclusion, this study focused on SWEP in Kuwait and its impact on firms’ financial and market performance. By examining companies listed in the Kuwait Boursa from 2016 to 2021 and utilizing a disclosure index based on guidelines provided by a combination of various sources and standards such as the Global Reporting Initiatives (GRI) Standard, S&P Global Corporate Sustainability Assessment, Dow Jones Sustainability Index, United Nations Global Compact, and KPMG Sustainability Reporting Standards, the study employed a time series regression analysis to test its hypotheses. The results revealed a strong positive relationship between the SWEP disclosure and firm measures of financial performance. In light of prior sustainability research [48,101,107,108,109,143,144,145,146,147,148,179,184,197], this result confirms that sustainability practices can positively impact profitability; however, this study was conducted in a different setting (Kuwait) and based on a different measure of sustainability disclosure (the SWEP index). Similar to prior sustainability research [47,171,172,173,174,175,190,194], the results also indicate that sustainability disclosure using the SWEP index is value-relevant and affects firms’ market value, suggesting that investors consider firms’ disclosure of the SWEP index when making investment decisions in the Kuwaiti context.

The study has practical implications from the perspective of CSR, social justice, and ethical considerations. The SWEP index has been developed in accordance with international organizations’ guidelines that ensure workplace equality, nondiscrimination, and fairness. In terms of policy implications, this study reveals that there is a strong positive relationship between SWEP disclosure and firm measures of financial performance and market value, suggesting that SWEP is valued by investors when making investment decisions in Kuwait. These results are also particularly significant for various stakeholders, including investors and policymakers. Notably, this study holds importance for the Kuwaiti Government as it aligns with the Kuwait Vision 2035/New Kuwait initiative which aims to transform the country into a financial and commercial hub for the region by 2035. Particularly, the Boursa Kuwait efforts to raise social responsibility awareness are deemed to be successful and perceived by investors to be value-relevant and incorporated in their firm valuation assessments.

This study has several limitations that should be acknowledged. First, the findings may not be easily generalizable beyond the listed companies in Kuwait during the specified time period, limiting the external validity of the results. Additionally, the researchers’ reliance on publicly available data and the construction of the SWEP disclosure index based on data sources may have led to potential subjective judgement. Future research could address these limitations by including companies from various countries, utilizing more comprehensive datasets, and investigating long-term effects and potential mediating or moderating factors. Such research efforts would contribute to a deeper understanding of the impact of SWEP on firm performance and inform the development of effective sustainable workplace policies and practices.