The Moderating Effect of Corporate Governance Reform on the Relationship between Audit Committee Chair Characteristics and ESG Disclosure

In the increasingly transparent global business landscape, ESG disclosure has shifted from an "option" of corporate social responsibility to a "necessary indicator" for measuring long-term corporate value and risk management. As expectations from investors, regulators, and the public regarding corporate sustainability practices continue to rise, ensuring the accuracy and credibility of ESG information has become a core issue that needs to be addressed at the corporate strategy level.

Corporate governance mechanisms, particularly the audit committee, play a key role in ensuring the accuracy of financial reporting. However, the mechanisms by which the characteristics of the audit committee chair affect the quality of non-financial information—i.e., ESG disclosure—are more complex. Elements such as their independence, professional experience, and board structure directly determine the depth and transparency of information disclosure.

This study focuses on a emerging market with significant governance reform background—Saudi Arabia. In this country, major corporate governance reforms driven by the 2030 Vision initiative provide a unique empirical field for examining the impact of institutional changes on corporate governance practices. The research aims to reveal which characteristics of the audit committee chair have a stronger driving force on the quality of ESG disclosure under this specific governance environment change.

From the perspective of corporate governance and agency theory, an independent and knowledgeable audit committee chair can effectively curb managerial opportunism, where management exploits information asymmetry for self-serving behavior, thereby enhancing the credibility of both financial and non-financial reports. Simultaneously, as companies face increasingly stringent ESG disclosure requirements, this oversight function becomes more prominent.

However, inherent challenges in emerging market governance systems, such as the maturity and consistency of regulatory frameworks, may constrain the oversight effectiveness of the audit committee. Therefore, the characteristics of the audit committee chair do not operate in a vacuum; their influence is significantly moderated by the macro governance environment.

The core finding of this study is that corporate governance reform plays a key mediating role in moderating this relationship. Specifically, under the context of governance reforms in Saudi Arabia, an independent and experienced audit committee chair is not only a necessary condition for improving the quality of ESG disclosure but also has their positive role further reinforced by the regulatory environment. These reforms have effectively enhanced market expectations for high-quality ESG information, maximizing the positive impact of independent chairs while mitigating the negative impact of other potential governance risk factors (such as related directors).

This phenomenon provides important strategic implications for global multinational corporations and emerging market policymakers: optimizing internal governance structures alone is insufficient to guarantee the quality of ESG information disclosure. Companies must actively embrace external regulatory reform signals, viewing governance reform as a strategic opportunity to enhance information transparency, build investor trust, and achieve long-term sustainable development goals. Ultimately, high-quality ESG disclosure is not just a compliance requirement but a key driver for reshaping long-term corporate competitiveness.