Board expertise, foreign institutional ownership and the quality of sustainability reporting: evidence from an emerging market context

Purpose This study aims to investigate how board directors’ expertise (BExp) influences sustainability reporting quality (SRQ) and examines the moderating role of foreign institutional ownership (FIO) within the context of an emerging market. Design/methodology/approach Using 643 firm-year observations of non-financial firms listed on the Indonesia Stock Exchange between 2014 and 2022, the study constructs an SRQ index through principal component analysis (PCA) of conciseness, clarity and reliability. Moderated regression analysis is then used to test the hypothesised relationships. Findings BExp, especially financial expertise, significantly lowers SRQ. On the other hand, an additional analysis shows that directors’ expertise in corporate social responsibility (CSR) significantly increases SRQ. Furthermore, a high level of FIO can reduce the negative effect of BExp, specifically financial expertise, on SRQ. Practical implications The findings emphasise the need for greater board diversity beyond financial expertise, highlighting the value of sustainability-related expertise in enhancing SRQ. Regulators in emerging markets may encourage firms to rebalance board composition and incentivise responsible foreign institutional investors to strengthen monitoring and sustainability reporting standards. Originality/value To the best of the authors’ knowledge, this is the first study to integrate BExp and FIO in explaining SRQ within an emerging market context. By drawing on agency theory and resource dependency theory, it provides new evidence that sustainability outcomes depend not only on firms’ internal governance resources but also on external pressures from global investors, thereby offering insights relevant to both emerging and developed markets.