How Corporate Governance Reform Regulates the Impact of Audit Committee Chair Characteristics on ESG Disclosure: A Long-Term Perspective on Emerging Markets

In an era where measuring corporate value increasingly shifts towards sustainability-driven approaches, Environmental, Social, and Governance (ESG) disclosures have evolved from auxiliary information to core indicators of long-term competitiveness. Expectations from investors, regulators, and society regarding a company's environmental responsibility, social impact, and governance transparency have soared, prompting companies to establish more persuasive and credible disclosure systems. In this context, the Audit Committee, as the highest body overseeing the company's financial and non-financial reporting, has its quality directly determining the authenticity and completeness of ESG information.

The personal attributes of the Audit Committee Chair—especially their independence, expertise, and experience—are considered key drivers in ensuring the quality of ESG disclosures. Research indicates that chairs with independent backgrounds and rich experience can supervise management more effectively, thereby enhancing the transparency and reliability of ESG reports. This oversight mechanism not only effectively prevents information asymmetry but also closely links corporate strategy with social responsibility, helping companies build trust in complex regulatory environments.

However, this relationship is not linear. In emerging markets where corporate governance frameworks are not yet fully mature, such as Saudi Arabia, the introduction of governance reforms plays a significant moderating role in this relationship. Governance reforms, exemplified by Saudi Arabia's 'Vision 2030' initiative, aim to build an institutional system more aligned with international standards. These reforms not only raise the bar for regulation but, more importantly, they provide the Audit Committee Chair with a more solid operational environment and clearer lines of responsibility.

Research has found that under the backdrop of governance reforms, the positive impact of the Chair's independence and experience on ESG disclosures is further amplified. This means that after the institutional framework is strengthened, high-quality governance mechanisms can more effectively translate the Chair's personal professional capabilities into the transparency of the company's sustainable development practices. Simultaneously, the reform's constraint on conflicts of interest also becomes more pronounced, effectively mitigating the negative effects of interlocking directorates and thus enhancing the robustness of ESG disclosures.

From a theoretical perspective, this phenomenon can be explained through agency theory and stakeholder theory. From the perspective of agency theory, establishing an independent chair is an effective tool to weaken managerial rent-seeking behavior and reduce information asymmetry. From the perspective of stakeholder theory, the Chair's expertise ensures that ESG disclosures accurately reflect the company's commitment to environmental and social responsibility, thereby meeting the expectations of various stakeholders such as investors and regulators. Corporate governance reforms, especially macro-strategy-driven changes like 'Vision 2030', provide the company with institutional incentives, compelling it to proactively improve its governance level and thus internalize ESG disclosures.For emerging markets, this coupling of governance and sustainability is key to achieving long-term competitiveness. By enhancing the transparency of ESG disclosures, companies can not only effectively reduce environmental and social risks but also attract international capital and improve alignment with global sustainable development goals (SDGs). This is not just a compliance issue, but a strategic choice to reshape the company's long-term business model and market position. Therefore, for emerging market enterprises and policymakers, optimizing the leadership structure of audit committees and continuously promoting the institutionalization of corporate governance is the underlying logic for ensuring that companies can achieve sustainable development while pursuing growth.