Managers' perceptions on the importance of integrative ESG : the role of corporate financial performance and corporate life cycle

Abstract

This study aims to examine the relationship between stakeholder attributes and integrative ESG reporting from the managers’ perceptions. Underpinning this study is the theory of stakeholder identification and salience developed by Mitchell, Agle and Wood (1997), which offers stakeholder identification based on stakeholder attributes of power, legitimacy and urgency that measure the salience or degree of priority given to certain stakeholders. Six main stakeholder groups are addressed: shareholders, employees, customers, government, local community and media. The study also investigates moderation effects of corporate financial performance (CFP) and corporate life cycle (CLC) on the relationship between stakeholder attributes and integrative ESG reporting. A mixed methods approach of sequential explanatory design is employed, which combines quantitative and qualitative approaches. This design is characterised by the collection and analysis of quantitative data using a questionnaire survey in the first phase, followed by the collection and analysis of qualitative data through semi-structured interviews in the second phase. The sample of the study is drawn from corporate managers of Malaysian companies listed on the Main Market of Bursa Malaysia. Managers are considered the companies’ representatives as they are involved in decision making and corporate reporting processes. A total of 68 questionnaires was completed and usable for analysis, and ten interviewees were involved in semi-structured interview sessions. The assessment of integrative ESG reporting using a fuzzy logic approach reports that sixty-three percent of the companies were grouped as having good integrative ESG reporting status. This result suggests that companies that disclose ESG factors consider environmental, social and governance factors equitably. The results reveal that there is a significant difference in managers’ perceptions of stakeholder attributes across different stakeholder groups. The study also found significant relationships of shareholder power, media legitimacy, media urgency and shareholder salience with integrative ESG reporting. Additionally, two-stage hierarchical multiple regression and add-on PROCESS were conducted to test the moderating effect of CFP and CLC. Significant moderator effects of CFP were found for the relationship between integrative ESG reporting and shareholder power, media legitimacy and shareholder salience, while potentially significant moderation of CLC were indicated for the relationship between employee legitimacy and employee urgency with integrative ESG reporting. The findings of the study provided a key message to the regulatory bodies to enforce restrictions and incentives in creating awareness on ESG factors, not only to managers but also to corporate stakeholders. Based on the theory of stakeholder identification and salience, it can be inferred that managers' perceptions of stakeholder attributes of power, legitimacy, urgency, and salience, which are aspects that influence corporate integrative ESG reporting. However, in this study, this was applied only to shareholders for attributes of power and salience and to media for attributes of legitimacy and urgency. It seemed that the results could be interpreted to suggest that the stakeholder model used in developed countries is not really suitable in the Malaysian context. This study further contributed to the methodology by demonstrating the use of mixed method in strengthening the findings and inferences made to understand the social context more deeply.