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Do Corporate Environmental Sustainability Practices Influence Firm Value? The Role of Independent Directors: Evidence from Saudi Arabia

Mohammed Abdullah Ammer (), Meqbel Mishary Aliedan () and Mansour Abdullah Alyahya ()
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Mohammed Abdullah Ammer: Department of Finance, School of Business, King Faisal University, Al-Ahsa 31982, Saudi Arabia
Meqbel Mishary Aliedan: Department of Business Administration, School of Business, King Faisal University, Al-Ahsa 31982, Saudi Arabia
Mansour Abdullah Alyahya: Department of Business Administration, School of Business, King Faisal University, Al-Ahsa 31982, Saudi Arabia

Sustainability, 2020, vol. 12, issue 22, 1-21

Abstract: Environmental sustainability has become a significant approach for firms to enhance their competitive advantage and reputation. This study examines the association between environmental sustainability disclosures and firm value, in addition to the moderating impact of independent board directors on this association. Using data from Saudi listed firms, we find that reporting environmental sustainability practices has a positive and significant impact on firm value, suggesting that enhanced responsibility and transparency in addition to improved stakeholder trust are important in promoting firm value. We also find that the influence of the reported environmental sustainability practices on firm value is strongly and positively moderated by the presence of independent directors on firms’ boards, signifying that stakeholders relate environmental reporting by firms to more independent directors providing better accountability to environmental practices. The implications of this study will be of great importance for policymakers, firm management, academia, and investors in considering the adoption and importance of firms’ environmental practices.

Keywords: firm value; environmental sustainability; corporate governance; board independence; Saudi Arabia (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
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