Social Sustainability Reporting in the GCC Banking Sector

: The Role of Corporate Governance and the Effect on Credit Rating

Abstract

The financial world is heading into a new era labelled by a vibrant integration between economic dynamics and the social demands addressed by the accelerating global movement of sustainability and responsible finance. In parallel, thorough academic efforts have been examining sustainability, its determinants and financial consequences. However, limited studies provided evidence from the banking sector with even fewer attempts in developing countries. Nevertheless, the Gulf Cooperation Council (GCC) region that is heavily dependent on oil is one of the richest regions in the world, yet it is a developing region. Accordingly, the banking sector would be very essential as it accommodates the wealth of those rich nations. As such, the banking sector of GCC countries is a main economic player as it represents the second largest industry after the oil industry. However, it has received minimal academic attention in regards to sustainability.
Sustainability is a large-scale type of knowledge that consists of three main pillars: social, environmental and economic. Hence, most of the studies look comprehensively at all pillars, while a growing demand in the literature is calling for more specialised studies concentrating on the dynamics and analytics, determinants and effects of each pillar. Therefore, this study contributes to the banking literature by focusing on the social dimension with evidence from GCC countries. It is one of the first studies to measure the social sustainability of GCC banks and provide a comparative analysis using one of the newest bank type segmentations that include: Islamic, hybrid and conventional banks. It also provides new evidence by investigating the role of corporate governance and examining the impact of social sustainability on credit rating. In regards to measuring social sustainability, the study contributes by proposing an index that combines the latest professional and academic social sustainability frameworks, including the SDGs, and at the same time adheres to the GCC banking settings. The data is collected manually from banks’ annual and sustainability reports using content analysis. Using a sample of 59 banks over a five-year period (2014- 2018), the research finds that social sustainability is increasing slightly over time, yet this increase is not statistically significant. It also shows that hybrid banks are outperforming both Islamic and conventional banks. The majority of board and audit committee characteristics are significantly influencing the performance of social sustainability. Besides, government ownership and sustainability-related committees are driving the social sustainability of GCC banks significantly. Lastly, banks with higher social sustainability levels enjoy better credit ratings.

Date of Award	23 Nov 2021
Original language	English
Awarding Institution	University of Portsmouth
Supervisor	Khaled Hussainey (Supervisor), Ahmed Aboud Mohamed Aboud (Supervisor) & Tarek Mohamed Hassan AbdelFattah (Supervisor)