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Corporate Governance for Sustainable Finance

A special issue of Sustainability (ISSN 2071-1050). This special issue belongs to the section "Economic and Business Aspects of Sustainability".

Deadline for manuscript submissions: closed (29 February 2024) | Viewed by 14925

Special Issue Editors

Department of Corporate Finance, University of Valencia, 46022 Valencia, Spain
Interests: corporate governance; board gender diversity; asset pricing; effect of the economic environment on financial decisions
Department of Corporate Finance, University of Valencia, 46022 Valencia, Spain
Interests: corporate governance; board gender diversity; corporate social responsibility reporting; environmental reporting; audit
Special Issues, Collections and Topics in MDPI journals

Special Issue Information

Dear Colleagues,

In 2015, the United Nations (UN) approved the 2030 Agenda with 17 Sustainable Development Goals (SDGs) and established a plan to achieve these goals within 15 years. However, the interest in companies’ environmental, ethical, and social performance began some years before, thereby displacing the interests of economic issues and highlighting the disclosure of non-financial company information. In this sense, companies with stronger corporate governance mechanisms will more likely guarantee transparency and ethics while continuing to generate earnings, while companies with weak corporate mechanisms may suffer pressure from stakeholders due to opportunistic managers on their board of directors, who can strategically exploit sustainable issues and information for their personal benefit. For this reason, companies demand internal and external mechanisms that may decrease the conflicts between agents and principals by minimizing information asymmetries between them and improving the transparency and quality of reporting.

Financial scandals and the international financial crisis have led to questions about the quality of financial information, Corporate Social Responsibility (CSR) policies, and company transparency. The lack of market confidence and investors has led to a substantial change in the corporate governance bodies of companies, whose efforts have shifted to improving CSR policies, corporate governance, sustainability, and the Sustainable Development Goals (SDGs).

Thus, sustainability has acquired a relevant role in wealth creation and long-term sustainable value without depleting resources, causing damage to the environment, or compromising the well-being of future generations (Weber, 2005). Sustainable finance is considered one of the most critical mechanisms encouraging the financial system to make positive changes. To do this, reference is made to issues related to the preservation of the natural environment, social aspects, and governance (ESG principles) when making investment decisions. On the one hand, the Sustainable Development Goals (SDGs) play a relevant role, being a means to establish a framework of international commitment to develop long-term policies and approaches involving different social and economic agents.

On the other hand, empirical research based on corporate goverance emphasizes the role of the Board of Directors (BD). In particular, the agency theory postulates that the separation between ownership and control generates information asymmetries because the company owners tend to delegate responsibilities to managers, generating agency problems (Jensen and Meckling, 1976). In this sense, firms have increased internal and external controls in order to reduce information asymmetries and agency costs and improve the transparency of financial and non-financial information. In this line, the composition of the BD is an important mechanism in mitigating or eliminating agency costs and aligning the interests of  principals and agents (Kang et al., 2007). Following this approach, the inclusion of female directors on the BD could strengthen the existing control mechanisms over managers and executives, since gender diversity on the board increases the board's independence given the different leadership style of executive women (Carter et al., 2010), who are often more risk-averse (Byrnes et al. 1999), allowing them to more quickly detect opportunistic behavior (Khazanchi, 1995; Ruegger and King, 1992); they also have a tendency to behave more ethically than their male counterparts. In this sense, the previous literature shows that gender diversity influences the best corporate governance practices (Burgess and Tharenou, 2002) and the quality of financial information (Qi and Tian, 2012), among others. Thus, the presence of women in ACs can act as a control mechanism (Adams and Ferreira, 2009), which can reduce agency costs (Hillman and Dalziel, 2003) and consequently increase value creation.

We are pleased to invite you to contribute to this Special Issue, entitled “Transparency, Social Responsibility and Corporate Governance for Sustainable Development”, which aims to contribute to the current body of research with high-quality articles related to transparency, disclosure of information on sustainability, good corporate governance practices, sustainable development, etc. Papers can address various fields of interest, including, among others:

  • Corporate governance;
  • Corporate governance recommendations;
  • Transparency of financial and non-financial information;
  • Agency theory;
  • Stewardship theory;
  • Institutional theory;
  • Board of Directors;
  • Board gender diversity;
  • Board subcommittes;
  • Sustainable finance;
  • Sustainable development;
  • Sustainable Development Goals;
  • Environment, Social, and Governance Principles (ESGs);
  • Investment Sustainable Principles.

References:

Adams, R. B., & Ferreira, D. (2009). Women in the boardroom and their impact on governance and performance. Journal of Financial Economics, 94(2), 291-309.

Burgess, Z., & Tharenou, P. (2002). Women board directors: Characteristics of the few. Journal of Business Ethics, 37(1), 39-49.

Byrnes, J., Miller, D., & Schafer, W. (1999). Gender differences in risk taking: A meta-analysis. Psychological Bulletin, 125(3), 367–383.

Carter, et al. (2010). The Gender and Ethnic Diversity of US Boards and Board Committees and Firm Financial Performance. Corporate Governance: An International Review, 18(5), 396-414.

Hillman, A. J., & Dalziel, T. (2003). Boards of directors and firm performance: Integrating agency and resource dependence perspectives. Academy of Management Review, 28(3), 383-396.

Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.

Kang, H., Cheng, M., & Gray, S. J. (2007). Corporate governance and board composition: Diversity and independence of Australian boards. Corporate Governance: An International Review, 15(2), 194-207.

Khazanchi, D. (1995). Unethical behavior in information systems: The gender factor. Journal of Business Ethics, 14(9), 741-749.

Qi, B., & Tian, G. (2012). The impact of audit committees personal characteristics on earnings management: Evidence from China. Journal of Applied Business Research, 28(6), 1331-1344.

Ruegger, D., & King, E. W. (1992). A study of the effect of age and gender upon student business ethics. Journal of Business Ethics, 11(3), 179-186.

Weber, O. (2015). Finance and Sustainability. In Sustainability Science: An Introduction, edited by Heinrichs, H., Martens, P., Michelsen, G., and Wiek, A., 119–129. New York: Springer.

Prof. Dr. Alfredo Juan Grau Grau
Prof. Dr. Inmaculada Bel Oms
Guest Editors

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Sustainability is an international peer-reviewed open access semimonthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 2400 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • corporate governance
  • gender diversity
  • sustainable finance
  • Sustainable Development Goals
  • 2030 Agenda
  • Corporate Social Responsibility
  • transparency

Published Papers (7 papers)

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Research

27 pages, 304 KiB  
Article
The Impact of Corporate Social Responsibility on Environmental Investment: The Mediating Effects of Information Transmission and Resource Acquisition
by Ruizhi Liu, Fei Song, Mark Wu and Yuming Zhang
Sustainability 2024, 16(6), 2457; https://doi.org/10.3390/su16062457 - 15 Mar 2024
Viewed by 423
Abstract
In recent years, more and more research has focused on the impact of corporate social responsibility (CSR) on business activities. Due to the existence of two different theoretical perspectives, shareholder value theory and managerial opportunism theory, the research on CSR has reached different [...] Read more.
In recent years, more and more research has focused on the impact of corporate social responsibility (CSR) on business activities. Due to the existence of two different theoretical perspectives, shareholder value theory and managerial opportunism theory, the research on CSR has reached different conclusions. Meanwhile, the motivations for environmental investments in enterprises have received attention from scholars. However, there is a lack of empirical research on the relationship between CSR and environmental investment. Therefore, this study conducts a regression analysis on the external evaluation of CSR and enterprises’ environmental investment using data from Chinese listed companies. The empirical results show a significant positive relationship between the external evaluation of CSR and enterprises’ environmental investment. The mediating tests conducted based on information transmission and resource acquisition mechanisms explain the reasons for this promotion effect, supporting the shareholder value theory. Furthermore, our research finds that this promotion effect is more significant in non-state-owned enterprises, enterprises receiving fewer environmental subsidies, enterprises disclosing environmental philosophies, and enterprises identified as key pollution-monitoring units in reports. The research findings of this study are meaningful for clarifying the economic consequences of CSR and provide practical evidence for Chinese enterprises to understand the importance of environmental investment and the government’s advocacy for enterprises to proactively engage in environmental investment. Full article
(This article belongs to the Special Issue Corporate Governance for Sustainable Finance)
22 pages, 809 KiB  
Article
Local Government Debt and Corporate Investment Behavior in China: Real versus Financial Investment
by Yuanlin Wu, Cunzhi Tian and Guannan Wang
Sustainability 2023, 15(22), 15756; https://doi.org/10.3390/su152215756 - 08 Nov 2023
Viewed by 775
Abstract
The ongoing expansion of local government debt (LGD) in China constitutes a significant impediment to economic development, while the existing literature predominantly concentrates on macro-level investigations, neglecting the repercussions of government debt expansion on firms. Firms serve as fundamental constituents of the real [...] Read more.
The ongoing expansion of local government debt (LGD) in China constitutes a significant impediment to economic development, while the existing literature predominantly concentrates on macro-level investigations, neglecting the repercussions of government debt expansion on firms. Firms serve as fundamental constituents of the real economy, and the suitability of their investment structure is a pivotal determinant of their robust development. Therefore, it is of great significance to investigate whether the investment structure of non-financial firms will undergo deviations attributable to the expansion of local government debt. This paper uses a two-way fixed-effects model to examine the causal effect of local government debt on firms’ investment structures. The quasi-natural experiment using the DID model with “Document 43” issued by China on local government debt governance as a policy shock can be a good endogeneity test. It is found that local government debt exacerbates the trend of “exit from real to virtual” of enterprises, leading to a bias towards financial investment in the investment structure of enterprises, and this result is still robust after a series of robustness tests. A heterogeneity analysis shows that the impact of LGD on the investment structure of firms mainly exists in non-state-owned firms, small-scale firms, and firms with high financing constraints. Overall, this study provides new evidence on how the government influences the investment structure of Chinese firms through the perspective of LGD, which helps firms to prevent and cope with the risks associated with LGD. Furthermore, it offers practical references and policy insights for government initiatives in the realm of local debt governance. Full article
(This article belongs to the Special Issue Corporate Governance for Sustainable Finance)
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18 pages, 1536 KiB  
Article
Gender Social Bonds in the Latin American Market
by Juan David González-Ruiz, Nini Johana Marín-Rodríguez and Alejandro Valencia-Arias
Sustainability 2023, 15(20), 15144; https://doi.org/10.3390/su152015144 - 23 Oct 2023
Cited by 1 | Viewed by 1184
Abstract
Although issuances of sustainable debt are growing worldwide, there is a lack of studies that allow a better understanding the social bond issuances, particularly those with a gender focus, which are directly related to the achievement of the Sustainable Development Goals 5, 8, [...] Read more.
Although issuances of sustainable debt are growing worldwide, there is a lack of studies that allow a better understanding the social bond issuances, particularly those with a gender focus, which are directly related to the achievement of the Sustainable Development Goals 5, 8, 9, and 10. This study addresses the identified knowledge gap by examining the overall state of the gender social bonds in the Latin American market between 2019 and 2022. The results revealed that a total of USD 1 billion was issued by 12 issuers conducting 14 issuances across six countries. Also, most issuances were financial corporations (58.4%) and supranational banks had a pivotal role in this market by being buyers and/or lead managers. As the first study conducted on this topic, this represents a milestone in sustainable finance research. Finally, this study will allow policy makers, regulators, and researchers to promote the issuance of gender social bonds. Full article
(This article belongs to the Special Issue Corporate Governance for Sustainable Finance)
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19 pages, 715 KiB  
Article
Corporate Governance and Financial Reporting Quality: The Mediation Role of IFRS
by Bayar Gardi, Mehmet Aga and Nabaz Nawzad Abdullah
Sustainability 2023, 15(13), 9869; https://doi.org/10.3390/su15139869 - 21 Jun 2023
Cited by 3 | Viewed by 3370
Abstract
This study investigates how corporate governance affects the financial reporting quality of selected banks in Iraq, focusing on the role of IFRS adoption. The research collected data from 298 questionnaires distributed among diverse private banks, including IS Bank, Vakif Bank, RT Bank, Cihan [...] Read more.
This study investigates how corporate governance affects the financial reporting quality of selected banks in Iraq, focusing on the role of IFRS adoption. The research collected data from 298 questionnaires distributed among diverse private banks, including IS Bank, Vakif Bank, RT Bank, Cihan Bank, Bank of Iraq, and TD Bank. Sobel analysis was used to analyze the mediation between variables. The results demonstrate that IFRS adoption plays a positive mediating role in the relationship between corporate governance and financial reporting quality in private banks. The study highlights the practical benefits of implementing strong corporate governance practices and adopting IFRS, such as improved reporting quality, regulatory compliance, better decision-making, and enhanced reputation. Private banks in Iraq can utilize these findings to enhance their financial performance and reputation by shaping their accounting and governance policies. The research paper provides original insights into the positive impact of corporate governance on financial reporting quality while considering the mediating influence of IFRS adoption, making it a valuable contribution to the research community. Full article
(This article belongs to the Special Issue Corporate Governance for Sustainable Finance)
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24 pages, 378 KiB  
Article
Sound Corporate Governance and Financial Performance: Is There a Link? Evidence from Manufacturing Companies in South Africa, Nigeria, and Ghana
by Leviticus Mensah and Murad Abdurahman Bein
Sustainability 2023, 15(12), 9263; https://doi.org/10.3390/su15129263 - 08 Jun 2023
Cited by 4 | Viewed by 2310
Abstract
The study aimed to compare the effect of sound corporate governance on manufacturing companies in South Africa, Nigeria, and Ghana on financial performance. The study used a purposive sampling method to select 60 manufacturing companies, of which twenty-nine (29) were from South Africa, [...] Read more.
The study aimed to compare the effect of sound corporate governance on manufacturing companies in South Africa, Nigeria, and Ghana on financial performance. The study used a purposive sampling method to select 60 manufacturing companies, of which twenty-nine (29) were from South Africa, 17 were from Nigeria, and 14 were from Ghana. The study employed GMM and FMOLS to estimate the effect of corporate governance on the firm’s financial performance. According to the study, South Africa has the longest average board tenure at 7.85 years, followed by Nigeria at 4.7 years and Ghana at 3.9 years. The average board tenure was found to have a positive and statistically significant effect on the return on invested capital (ROIC) of the firms in South Africa and Ghana, and a positive and statistically insignificant effect was found for the firms in Nigeria. The study indicated that the firms in South Africa have the highest percentage of female directors at 24.26%, followed by Ghana at 17.8% and Nigeria at 17.3%. The study showed that female representation on the corporate board has a positive and statistically significant effect on all firms’ return on net operating assets (RONOA). The study provides policy implications for shareholders, boards of directors, and other stakeholders by enabling them to build confidence in the corporate governance structure of manufacturing companies in the three countries. Full article
(This article belongs to the Special Issue Corporate Governance for Sustainable Finance)
20 pages, 465 KiB  
Article
The Moderating Effects of Corporate Social Responsibility on Corporate Financial Performance: Evidence from OECD Countries
by Hawkar Anwer Hamad and Kemal Cek
Sustainability 2023, 15(11), 8901; https://doi.org/10.3390/su15118901 - 31 May 2023
Cited by 2 | Viewed by 2645
Abstract
This study aims to investigate the nature and intensity of the changes in corporate financial performance due to the corporate social responsibility (CSR) disclosures as a result of certain relationships between corporate governance and company performance in the non-financial sector. This study selected [...] Read more.
This study aims to investigate the nature and intensity of the changes in corporate financial performance due to the corporate social responsibility (CSR) disclosures as a result of certain relationships between corporate governance and company performance in the non-financial sector. This study selected 625 non-financial companies across six organizations for economic cooperations (OECD) countries’ stock markets for the period of 10 years (2012–2021). For this qualitative study, corporate governance, financial performance, and corporate social responsibility score data were collected from the DataStream, a reliable database for examining the research on OECD countries’ listed companies. For the data analysis we applied various statistical tools such as regression analysis and moderation analysis. The findings of the study show that all attributes of the corporate governance mechanism, except for audit board attendance, have significant positive impacts on financial performance indicators for all the selected OECD economies except the country France. France’s code of corporate governance has a significant negative impact on return on asset (ROA) and return on equity (ROE) due to differences in cultural and operational norms of the country. The audit board attendance has no significant impact on ROA. Moreover, all the attributes except board size (BSIZ) have significant positive impacts on the earnings per share (EPS) in Spain, The United Kingdom (UK) and Belgium. The values obtained from the moderation effect show that Corporate social responsibility is the key factor in motivating corporate governance practices which eventually improves corporate financial performance. However, this study advocated the implications, Investors and stakeholders should consider both corporate governance and CSR disclosures when making investment decisions. Companies that prioritize both governance and CSR tend to have better financial performance and are more likely to mitigate risks. Moreover, the policy makers can improve the code of corporate governance in order to attain sustainable development in the stock market. Full article
(This article belongs to the Special Issue Corporate Governance for Sustainable Finance)
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14 pages, 263 KiB  
Article
Can Labeled Green Bonds Reduce Financing Cost in China?
by Zhen Sun, Jianfen Feng, Rongxi Zhou, Yue Yu and Yaojian Deng
Sustainability 2022, 14(20), 13510; https://doi.org/10.3390/su142013510 - 19 Oct 2022
Cited by 3 | Viewed by 1794
Abstract
From the perspective of financing cost, this article investigates the benefits of green bonds to the issuer. Based on 227 green bonds and 405 conventional bonds selected from China’s bond market, we find that (1) green bonds can decrease financing cost by at [...] Read more.
From the perspective of financing cost, this article investigates the benefits of green bonds to the issuer. Based on 227 green bonds and 405 conventional bonds selected from China’s bond market, we find that (1) green bonds can decrease financing cost by at least 15 bps in the primary market, which is more significant than the effect in the secondary market; (2) third-party certification can strengthen the ‘greenium’ of green bonds in both the primary and secondary markets; and (3) there is no ‘greenium’ effect for financial green bonds in either primary or secondary markets in China, even for green bonds with third-party certification. Full article
(This article belongs to the Special Issue Corporate Governance for Sustainable Finance)
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