Sustainability, corporate governance, and firm performance: Evidence from emerging markets

Abstract

The purpose of this paper is to explore and investigate the influence of sustainability especially the environmental pillar and corporate board diversity on the financial performance in emerging markets. This study examines the effect of sustainability and board composition on firm performance. The sample of this study comprises 1382 firms with a total of 19199 firm-year observations covering a period from 2008 to 2021. These firms are listed in the MSCI emerging markets index representing 24 emerging countries. The results show that the main index of sustainability (ESG index) and other sub-indices (environmental score, emission score and CO2 equivalent emission) of sustainability that are used as measures of climate change have an effect on accounting-based performance (return on assets, ROA) and market-based performance (Tobin’s Q and book-to-market value, BTMV). Also, the results show that age, nationality and education as board diversity components affect the firm performance; however, the female directors on the board did not affect the firm performance.