CHAPTER ONE
INTRODUCTION
Background of the Study
The current economic era is known as the information era and as such the modern business community considers information disclosure as a key factor in decision making. When businesses decide to share information with their stakeholders, there are a number of avenues through which they may decide to do so. Traditionally, firms used paper-based reporting systems in sharing information with their stakeholders (Puspitaninrum & Atmini, 2012) . However, in a brace of decades, the advent of the internet has ushered in an alternative means by which firms (regardless of their nature) can report information using their website. One thing unique about reporting information through the internet is its global accessibility and interactive nature (Reilly 1997; Menicucci, 2018). Furthermore, it is evident that reporting information via corporate websites can enhance the level of disclosures since it reduces cost, and also increase accessibility to disclosed information, it is therefore necessary to deliberate on the kind of information disclosure the study aims at emphasizing on and why. This study is aimed at assessing the extent to which listed banks on the Ghana Stock Exchange voluntarily communicate corporate governance information to their stakeholders using the company’s corporate website.
The present-day stakeholders of business do not only require financial reporting but are also interested in the non-financial affairs of the business in order to judge how sustainable firms’ operations are. Owing to the fact that global economic activities are widely perceived as
unsustainable, sustainability disclosure or reporting has become a very popular terminology among academics, regulators, and businesses. According to a report by Deloitte and Touche and Business Council for Sustainable Development (BCSD) in 1992, increasing scientific research on sustainability has positive effects of aiding businesses in adopting operational strategies that do not only meet the goal of shareholder wealth maximization but also satisfies the interest of other stakeholder group (like society, suppliers, regulators, etc.), and at the same time “ sustain and enhance social assets and natural resources for the future” (Deloitte and Touche and BCSD, 1992).
The World Commission on Environment and Development (WCED) in 1987 defined sustainability as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (World Commission on Environment and Development, 1987). Although such a definition is widely held in literature, it is noteworthy that such definition mainly dwells on an organization’s interaction with the natural environment (Gibson, 2006; Marshall & Brown, 2003). Presently, there has been an increasing demand from stakeholders that organizations not only report their environmental impacts but also to include disclosures on issues pertaining to society, governance, human right among others (Heikkurinen, & Bonnedahl, 2013).
The case of Governance reporting is a special one that demands attention since several empirical findings suggest that good corporate governance structures ensure adequate disclosure of the other components of sustainability. Full disclosure of corporate governance information is crucial in demonstrating management’s transparency and in the conduct of business affairs, improves corporate reputation, and helps the reporting entity to be legitimized Blaesing (2013). Within this study, the corporate website of the banks under study is analyzed based on the sustainability reporting framework provided by the Global reporting initiative (GRI). The analysis is undertaken
in order to determine the level of corporate governance indicator (e.g. reportage on board of directors, board composition, company mission, vision, core values, etc.) disclosure by listed banks in Ghana and the extent to which the disclosures meet requirements of the GRI.
Problem Statement
There are a number of empirical studies that deal with sustainability reporting in one way or the other. Despite this popularity, a survey of literature reveals that most of these studies largely place emphasis on environmental and social sustainability, with only a limited number of studies dedicated to the governance aspect of sustainability. For example, Within the Ghanaian context, most studies that purport to study Environmental, Social and Governance (ESG) practices of firms have largely placed emphasis on corporate social responsibility activities of corporate entities (e.g. Hinson & Boateng, 2010; Amponsah-Tawiah, 2011; Agyei-Mensah, 2016; Nyarku & Hinson, 2017) and not on the governance structures. This gap in literature represents a less discussed issue that requires further research attention, and this study seeks to fill the gap.
In addition, sustainability studies as far as developing countries’ context are concerned are relatively low (Abernathy, Stefaniak, Wilkins and Olson, 2017, Lichtenstein, Badu, Owusu-Manu, Edwards and Holt, 2013). An extant review of literature suggests that most studies on sustainability have largely emphasized on European and North American corporate entities, with little attention dedicated to developing countries (Abernathy et al, 2017, Lichtenstein et. al., 2013). Meanwhile, research findings in the developed world (Europe and North America) cannot be assumed to be universally applicable to developing countries due to differences in culture,
infrastructure among others (Rogers, 2016). This, therefore, calls for a study focusing on firms in the developing world (like Ghana) in order to close the context gap in sustainability literature.
Finally, a lot of studies have concluded that sustainability reporting using the GRI framework alleviates information asymmetry existing between corporate entities and their stakeholders (Lo and Sheu, 2007; Schadewitz and Niskala, 2010). However, because sustainability reporting is voluntary in the Ghanaian context, most firms who decide to report on sustainability do so without the Guidance of any framework and this makes it difficult to judge the sufficiency of information disclosed. This study, therefore, is relevant as it will measure the extent of sustainability reporting of listed banks against the GRI framework and highlight the extent to which Ghanaian banks report non-financial information related to governance.
Research Objectives
The primary objective of the study is to investigate the web-based reporting practices of listed banks on the Ghana stock exchange. This broad objective has been specified into the three research objectives as follows
- To investigate the web-based disclosure practices of listed banks concerning organizational profile and strategy.
- To investigate the web-based disclosure practices of listed banks concerning stakeholder engagement and governance process.
- To investigate the web-based disclosure practices of listed banks concerning ethical standards and integrity.
Research Questions
The study seeks to provide answers to the following questions in order to achieve the research objectives outlined above.
- What is the web-based disclosure practices of listed banks concerning organizational profile and strategy?
- What is the web-based disclosure practices of listed banks concerning stakeholder engagement and governance process?
- What is the web-based disclosure practices of listed banks concerning ethical standards and integrity?
Scope of the Study
The study is focused on Ghanaian Banks but limited to listed banks on the Ghana Stock Exchange. This will ensure that the study gains control and is completed within the limited timeframe.
The study is limited by the fact that disclosure of sustainability information on banks’ website is non-mandatory in Ghana. This means, a Bank may choose to report some information and leave others out, hence presenting a misleading posture.
Organization of the Study
The study is organized into five chapters. Chapter one presents the general introduction, background of the study, statement of the problem, research objectives, research questions, significance of the study, the scope of the study, limitations of the study and the organization of the study. Chapter Two reviews literature related to the study. Chapter Three describes the research
methodology of the study. Chapter Four presents a discussion of the study results. Chapter Five, which is the last chapter, covers the summary, conclusions, recommendations and suggestions for further research work.
Significance of the Study
The relevance of this study lies in its contribution to theory, practice and policy.
To theory, the study being one of few empirical enquiries in the field will serve as a reference point for future studies to follow. This is due to the fact that previous studies emphasizing on sustainability reporting mostly emphasize on the social (CSR) and environmental dimensions, with little attention dedicated to the governance aspect of sustainability. Besides, most of the existing studies emphasized on reporting governance information in the annual reports of firms, but this study focuses on website reporting of governance information among banks. All these make the study a theoretical opening for other researchers to follow.
To practitioners, this study is valuable to corporations who seek greatness in a foreseeable future as its findings is a valid source of knowledge for corporations to feed on, as far as sustainability is concerned.
The study is also beneficial to the government and regulatory bodies as they endeavor to achieve the Sustainable Development Goals (SDGs). The findings of the study is resourceful to policy makers in strengthening company’s policies on governance and ethics.
