Board Characteristics and the Readability of Sustainability Reports of Listed Companies in East Africa

Abstract

There is a significant risk that sustainability reports can be manipulated to give a better impression of a firm’s sustainability performance than the actual performance. Sustainability reports need to be readable to enable users of financial statements to monitor the actions of management with respect to the firm’s sustainability performance. The board of directors is charged with the responsibility of the preparation of financial statements including sustainability reports therein. This research thus sets out to investigate whether board characteristics affect the readability of sustainability reports. The study employed Flesch readability ease and Fog readability indices. The explanatory research design was employed a census approach was used in studying 15 listed firms across East African security exchanges that voluntarily prepared sustainability reports during the 5-year study period between years 2017 to 2022.  The purposive sampling method was employed that focused on listed firms in the NSE that had published sustainability reports during the study period. The study results indicated female directorships had a significant and positive relationship with the readability of sustainability reports in companies listed in East Africa security exchanges. The findings implied that the more female directors in a board, the more the readability of sustainability reports. Policymakers and owners of the listed firms in EA security exchanges should thus take note of these findings in order to make the sustainability reports more readable. Listed firms in Kenya should consider increasing the proportion of female directors in order to enhance the readability of sustainability reports.