Assessing The Moderating Role of Regulatory Environments on Ownership Structure and ESG Disclosure in West Africa

Abstract

As the disclosure of Environmental, Social, and Governance (ESG) practices become a requirement for corporate transparency and sustainability, disclosure of ESG practices is also becoming important in emerging markets where such disclosures have not been explored much. Innovatively responding to this gap, this study investigates how regulatory environments moderate the ownership structure—ESG disclosure relationship in West Africa. To produce empirical analysis, using a comprehensive dataset of 215 manufacturing firms across West Africa between 2010 and 2022, the research utilizes fixed effect and random effect estimations. Results show that managerial, state and foreign ownership enhance ESG disclosure significantly, while blockholder ownership does not. Additionally, the effect of the regulatory environment in transforming the link between ownership structure and ESG disclosure is robust, which indicates that in order to increase the transparency and accountability of firms, regulatory frameworks need to be developed thoroughly. On the other hand, the presence of weaker regulatory environments does not enhance the effectiveness of ownership structure's effect on ESG disclosures, suggesting the major role of regulatory contexts in shaping the corporate sustainability behavior. This research uses Institutional Theory, Stakeholder Theory, and Legitimacy Theory to emphasize business operations must match social expectations and demands. The research adds to corporate governance and sustainability literature by empirically testing how regulatory contexts affect ownership structure and ESG behavior. The findings help policymakers, investors, and stakeholders promote sustainable development via ESG transparency. This research shows that stronger regulatory frameworks and stakeholder engagement are needed to improve corporate governance, sustainability, and business transparency and accountability in the region.