Advancing ESG Performance in MENA Economies: Do Governance Structures and Eco-Technology Matter?

Abstract

Can effective corporate governance catalyze sustainability in one of the world's most environmentally and institutionally vulnerable regions? As Environmental, Social, and Governance (ESG) performance gains global momentum, the role of governance structures in shaping these outcomes remains insufficiently examined in the MENA region. This study fills a critical gap by investigating how internal governance mechanisms influence ESG performance in manufacturing firms, with particular attention to the moderating role of eco-technology, captured through technological innovation and environmental regulations. Grounded in agency, stakeholder, and resource-based theories, the analysis draws on panel data from 328 MENA manufacturing firms between 2010 and 2022. To address endogeneity concerns and ensure robust estimation, the study applied the Dynamic Common Correlated Effects estimator, dynamic GMM, and IV-2SLS techniques. The findings reveal that board independence, gender diversity, and larger board size positively affect ESG performance. Conversely, CEO duality and the presence of foreign nationals on boards correlate negatively with ESG outcomes. Notably, eco-technology significantly amplifies the positive effects of strong governance structures, underscoring its strategic role in driving sustainable business practices. These results suggest that firms in the MENA region should promote inclusive and independent board compositions, limit CEO duality, and reassess the governance role of foreign nationals to better align with regional ESG priorities. The study emphasizes the importance of tailored governance reforms and the integration of innovation and regulation in corporate strategy. It offers practical insights for policymakers and business leaders seeking to leverage governance as a catalyst for sustainable development in emerging economies.