Corporate Governance Quality and Its Influence on Sustainability Reporting Accuracy

Muhammed Zakir Hossain, Md. Jobaer Rahman Rashed, Annatul Islam Hredoy and Fariha Tazin
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Muhammed Zakir Hossain: Associate Professor, Department of Business Studies, State University of Bangladesh, Bangladesh
Md. Jobaer Rahman Rashed: Humphrey School of Public Affairs, University of Minnesota, USA
Annatul Islam Hredoy: Carlson School of Management, University of Minnesota, Minneapolis, MN 55454, USA.
Fariha Tazin: Assistant Professor, Department of Business Studies, State University of Bangladesh, Bangladesh

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Abstract: Sustainability reporting has emerged as a crucial aspect of corporate accountability, driven by stakeholders' growing demand for reliable, transparent, and decision-useful environmental, social, and governance (ESG) disclosures. Nonetheless, issues regarding the precision of sustainability reporting remain significant, especially in developing economies like Bangladesh, where regulatory enforcement is still in progress. This study examines the impact of three essential governance mechanisms—board independence (BI), audit committee effectiveness (ACE), and internal control strength (ICS)—on the accuracy of sustainability reporting (SRA). A structured questionnaire was distributed to professionals in corporate governance across various industries, resulting in 170 valid responses. Employing SPSS version 26, the correlation analysis indicated moderate to strong positive associations between each governance mechanism and SRA. The most significant correlation was found for ACE (r = 0.522), followed by ICS (r = 0.487) and BI (r = 0.451). Regression analysis indicated that all three governance mechanisms are significant predictors of sustainability reporting accuracy: BI (β = 0.241, p < 0.01), ACE (β = 0.314, p < 0.01), and ICS (β = 0.287, p < 0.01). The governance variables together account for 47.3% of the variance in SRA (R2 = 0.473), highlighting a significant impact of governance on reporting reliability. The results provide strong empirical support for the hypothesis that companies with enhanced governance frameworks—marked by independent oversight, efficient audit committees, and robust internal controls—tend to produce precise and trustworthy sustainability disclosures. This study underscores the critical role of governance quality in bolstering reporting integrity. It provides actionable insights for policymakers, corporate boards, and regulatory bodies seeking to improve the accuracy of sustainability reporting in emerging markets.

Keywords: Bangladesh; ESG Disclosure; Internal Control Strength; Audit Committee Effectiveness; Board Independence; Sustainability Reporting Accuracy; Corporate Governance Quality (search for similar items in EconPapers)
Date: 2026-01-04
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Published in European Journal of Innovative Studies and Sustainability, 2026, 2 (1), pp.79-92. ⟨10.59324/ejiss.2026.2(1).04⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05736594

DOI: 10.59324/ejiss.2026.2(1).04

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