Corporate Governance Factors Affecting the Adoption of CSR Practices and Improved Financial Performance in Saudi Listed Companies

Abstract

Demands for better protection of stakeholder interests in a world of increasing corporation complexity have challenged existing models of corporate governance (CG) and placed boards of directors (BODs) under growing pressure to improve their standards of performance. Research on the links between good CG, corporate social responsibility (CSR) and superior financial performance indicators (IFPIs) has led to debate over the characteristics and roles required of boards to drive corporations towards meeting their stakeholders' expectations. Despite these efforts, however, there is no consistent evidence of systematic relationships between CG, CSR and IFPIs. This is largely due to the focus of prior studies on the contextual influences of CG variables in isolation from the CSR context, a lack of research on board characteristics and roles in the CSR context, and the lack of a model to measure the adoption of CSR practices in relation to financial performance (FP). This research examines how CG factors - in particular board characteristics (i.e. diversity and competence) and roles (i.e. monitoring, service and strategic) - affect the adoption of CSR practices and lead to improved FP in Saudi listed companies (SLCs) using a mixed methods approach.