The moderating role of board gender diversity in ESG and firm performance: Empirical evidence from Gulf countries

Abstract

The study aims to analyze the impact of environmental, social, and governance performance (ESGP) on firm performance (FP) in the Gulf countries. Furthermore, this study examines how the number of female members on the board affects the relationship between ESGP and FP. This study uses balanced panel data of 424 firm-year observations from 106 Gulf non-financial listed firms from 2018 to 2021. The results show that the effect of ESGP and social performance (SP) on return on equity (ROE) is positive and statistically significant. SP and governance performance (GP) reveal a positive impact on ROE. However, a negative impact is exhibited instead for Tobin's Q (TQ). Conversely, environmental performance (EP) positively affects both ROE and TQ. Besides that, the diversity of board gender significantly and positively strengthens the relationships of ESGP, EP, SP, and GP with FP. The study concludes that policymakers in the Gulf countries and public company executives can use the suggestions from this research to change existing corporate governance rules to encourage more ESG performance and board diversity. We also emphasize the need to consider ESG performance and the diversity of the board when making plans to meet societal expectations and reach business goals. To the best of our knowledge, this study is among only a few that have investigated the effect of board gender diversity on the impact of ESGP on FP in the context of Gulf countries.