Does audit quality influence the relationship between ownership structure and environmental, social and governance disclosure? Evidence from Egypt

Abstract

Purpose: This study aims to examine the relationship between ownership structure and environmental, social and governance (ESG) disclosure, as well as the moderating effect of audit quality on this relationship. Design/methodology/approach: The authors used a sample of 105 nonfinancial companies listed on the Egyptian Stock Exchange (EGX) over the period 2017-2023, resulting in a total of 735 firm-year observations. ESG data were collected through content analysis of annual reports, and the analysis was conducted using a firm fixed-effects regression model. Findings: Results suggest that companies with a certain ownership structure, high ownership concentration and significant institutional ownership tend to disclose more ESG information. Moreover, audit quality acts as a moderating factor that strengthens this relationship. These findings remain robust across various sensitivity tests and offer valuable insights for policymakers. Notably, the COVID-19 pandemic has increased the level of ESG disclosure and further reinforced the positive linkage between ownership structure and ESG transparency. Practical implications: Findings provide valuable insights for regulators, investors and companies. Regulators may consider reinforcing policies that encourage specific ownership structures while enhancing audit quality through stricter standards and greater transparency. Investors can identify companies with governance characteristics linked to higher ESG disclosure, leading to informed decision-making. Companies can strategically adopt ownership structures and prioritize audit quality to boost ESG transparency, attract investment and enhance stakeholder trust. Originality/value: This study contributes to the ESG literature by highlighting the interconnected role of ownership structure and audit quality in shaping ESG disclosure through the lenses of agency and institutional theories. It also adds unique value to ongoing discussions on corporate sustainability and governance, supporting efforts to foster long-term financial performance and sustainable growth.